Copper is a shiny, pinkish-orange metal that is soft, malleable, and ductile. It is one of the oldest commodities known to man and has been in use for more than 10,000 years, with its origin traced to the ancient Egyptians. Copper is the third most widely used metal, after iron and aluminum, and copper futures are among the most heavily traded on commodity exchanges.

Copper futures are perfect for traders and hedgers who want easy and cheap access to the copper market. On the CME Group, a copper futures contract (HG) is equivalent to 25,000 pounds of copper, and the price quotation is in U.S. dollars and cents per pound. The minimum price fluctuation is 5/100 of a cent per pound or $12.50 per contract.

With its high electrical and thermal conductivity, copper is a very useful industrial metal, which is often used to gauge the state of the global economy. If there is an increasing demand for copper, the economy is expanding. Despite being used in making dimes, copper is not often seen as a currency, so copper futures are usually priced lower than gold and silver.

Copper Futures Contract Specifications
Symbol
HG
Exchange
CME
Tick Size
$12.50
Point Value
$25.000
Contract Size
25,000 pounds
Contract Months
Mar, May, Jul, Sep, Dec (H, K, N, U, Z)
Trading Hours
(5:00p.m. - 4:00p.m. Sun-Fri) (Settles 12:00p.m.) CST
Settlement
Physical
Last Trading Day
Third last business day of the contract delivery month

Uses of Copper

Although copper futures may not be as popular as gold, it is still widely traded because of the diverse uses of the commodity, which includes the following:

Electrical wiring: Due to its high electrical conductivity and relatively cheap price, copper is the preferred material for most categories of electrical wiring, such as power distribution cable, in-house wiring, electric motors, communication cable, and automotive wire. The only exception is in overhead power transmission, where aluminum is preferred

Electronics and related devices: Copper is used in integrated circuits and printed circuit boards, as well as in electromagnets, vacuum tubes, cathode ray tubes, magnetrons in microwave ovens, and waveguides for microwave radiation. Its high heat dissipation property makes it useful in heat sinks and heat exchangers.

Building material: Copper is corrosion-resistant and is used as waterproof material in building works, such as roofs, flashings, plumbing, and wall cladding.

Marine hardware: In addition to its corrosion-resistant properties, copper is also biostatic, making it very useful in making marine hardware.

Domestic products: Because of the antimicrobial properties of copper, the U.S. Environmental Protection Agency has approved the use of copper alloys for making antimicrobial materials, including bed rails, handrails, doorknobs, and cookware.

The Largest Producers and Consumers of Copper

Although a reasonable percentage of copper supply comes from recycled old copper products, most of the global production of copper comes from underground mines. The top producer is Chile, followed by Peru and China. Other major producers include the United States, Australia, the Democratic Republic of Congo, Zambia, Canada, Russia, and Mexico.

China is the biggest consumer of copper, followed by Russia, and the European Union. The United States and Japan are also major consumers of copper. In recent times, there has been a huge increase in the demand for copper from China, Russia, and Eastern Europe.

Why Trade Copper Futures

The reasons for trading copper futures vary among traders. While some trade copper futures contract for speculative purposes, others use it as a hedging tool against inflation or to diversify their investment portfolio. Entities that are directly involved in the production or utilization of copper trade copper futures to manage their price risk.

Hedging against price fluctuation: Copper miners and other producers of the commodity come to the copper futures market to secure a good price for their product, while the major users of the commodity come to the market to ensure a stable supply.

Speculation: Apart from the stakeholders in the copper production and utilization industry, the majority of traders in the copper futures market trade purely for speculative purposes. Speculative traders try to benefit from the regular fluctuations in copper futures prices.

Diversifying portfolio: Commodity investors and fund managers see the commodity market as an opportunity to diversify their investment portfolio across a wider range of asset classes so as to reduce systemic risk. Copper futures is not only popular among commodity investors, but it’s also seen as a reliable barometer of the state of the economy.

Inflation hedge: As with other commodities, copper prices rise when there is rising inflation. So, it is a good means of protecting one’s wealth from the effects of inflation.

How to Trade Copper Futures

Trade Copper Futures

Trade Copper Futures

Copper futures contracts are offered on the London Metal Exchange, Multi Commodity Exchange, Shanghai Futures Exchange, Tokyo Commodity Exchange, and the Commodity Exchange Inc (COMEX), which is a member of the Chicago Mercantile Exchange (CME) Group. The contracts can be traded from any part of the world through the CME Globex electronic trading platform.

On the CME Group, a copper futures contract (HG) is equivalent to 25,000 pounds of copper, and the price quotation is in U.S. dollars and cents per pound. The minimum price fluctuation is 5/100 of a cent per pound or $12.50 per contract.

The contract normally expires in the months of March, May, July, September, and December. At expiration, the contract is settled by physical delivery. For the Grade 1 copper contract, the grade and quality spec is Grade 1 Electrolytic Copper Cathodes (full plate or cut) that conforms to the chemical and physical requirements for Grade 1 Electrolytic Copper Cathode as adopted by the latest revision of the American Society for Testing and Materials.

Traders, who don’t want to take or make delivery of the commodity, can roll over their contracts to the next expiration months. To start trading copper futures, all you need is to create an account with the exchange through your futures broker and deposit the required margin. A copper futures contract is a leveraged instrument, so you need not have the full dollar worth of the contract to start.

However, you should be cautious about leveraged instruments — while they can make you more money, they can also make you lose more.

Copper Futures Trading Strategies

Copper Futures Strategies

Copper Futures Strategies

Finding a trading strategy for the copper futures market is possible, but not as easy as with some of the other more popular markets. However, once you find one, there is a great chance that it will correlate well with the rest of your trading strategies, and fit well into the portfolio!

In fact, this is one of the main reasons why we trade copper futures trading strategies here at the robust trader. With many uncorrelated trading strategies, we get lower drawdowns and higher profits in the long run.

If you’re interested in ideas for trading strategies, we recommend that you have a look at our edge membership!

Copper Futures Seasonality

Here is a seasonal chart of the copper futures market:

Copper Futures (HG) Seasonal Chart

Factors That Affect Copper Futures

Several factors affect the prices of copper futures contracts, and these are some of them:

Demand and supply imbalances: Increasing copper demand from the emerging market countries, such as China and India, can affect copper prices. Another factor that affects copper demand is the U.S. housing market. Supply disruptions — due to environmental, political, or labor issues in South America — can also affect copper prices.

Substitute metal prices: The prices of substitute metals, such as aluminum and nickel, can have an effect on copper prices.

Industrial metal reports: The data can also affect copper prices.

Conclusion

Copper is a very good conductor of heat and electricity, and it’s one of the most widely used industrial metals. Several commodity exchanges around the world offer copper futures.

ARE YOU IN?

Sign up to our newsletter to get the latest news!

Login to Your Account



Signup Here
Lost Password