The Alchemist, Issue 27: Any Sign of a Copper Bottom
Given the performance of metals prices since their peak five years ago, where we are in the commodity price cycle and when an upturn should be expected are amongst the key questions for the industry. Less discussed is exactly what this price cycle is; although future prices will be determined by supply and demand, we wanted to see what statistical and mathematical analysis of historical copper prices could add to the debate. We undertook the analysis with a view to establishing exactly what copper price cycles have looked like in the past and also used some predictive techniques to provide some guidance for what we might expect from future copper price trends.
Amongst the key findings of the analysis is that the long-term copper price cycle appears to have a 60-year periodicity and that within this there is a weaker 20-year sub-cycle. Although the recent peak in the copper price in 2011 coincided with the top of the 20-year cycle, the longer-term 60-year supercycle is only just peaking now. Although this suggests more long-term downside to pricing, more positively, the pace of the copper price decline over the past five years suggests that a positive correction may now be overdue.