What is Doctor Copper?
Copper is a base metal that has versatile applications across utilities, heavy industry, transport and communication. Therefore, the price of copper, which is determined by demand-supply dynamics for the metal, is considered to be an excellent indicator to the health of the global economy. Economists use the term Doctor Copper when using signals from copper prices to gauge the state of the economy.
The International Copper Study Group estimates the key user industries for copper to be equipment (31 per cent), construction (29 per cent), industry (11 percent), transport (13 per cent) and infrastructure (16 per cent). This wide range of applications makes copper prices a bellwether indicator of the twists and turns of the economic cycle.
As China, one of the fastest growing economies, consumes almost 50 per cent of the world’s copper ore each year, copper prices show a strong correlation with the Chinese economic growth. For instance, Chinese GDP growth decelerated from around 10 per cent in 2011 to 6.7 per cent by 2016. During this period, the copper prices plummeted from nearly $10,000 per tonne in 2011 to a multi-year low of $4,300 per tonne, in the beginning of 2016.
When China started recovering along with the world economy in 2017, copper prices rebounded by about 30 per cent to $7,200 per tonne in the one year to end-2017.
Source: The Hindu Businessline,04,June,2018