Trade Grade A Copper Futures on the LME
The high grade copper futures contract, called copper grade A, is the second largest contract traded on the the London Metal Exchange, regarded as the world benchmark exchange for copper pricing. In fact, around 94% of world copper futures are traded on this exchange, where official prices are quoted in US dollars per tonne. The other exchange trading copper is the COMEX division of NYMEX.
As the third most widely used metal in the world (after iron (1st) and aluminium (2nd)), copper is used in the electrical and construction industry sectors.
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There are two stages from the ore to final product, namely production which involves mining, smelting and refining, followed by fabrication, which is using the refined cathode copper and wire for various products.
Copper is a malleable metal and has good resistance to corrosion and so has applications in alloys such as brass, and is used to make metal objects of varying shape.
The economic growth in the emerging BRIC economies such as China, India and Brazil has led to surging demand for high grade copper.
Worldwide mine production is over 14 million tonnes, and Canada and Chile are the largest copper producers in the world, along with Australia and Central Africa.
Trading Copper Grade A futures
Copper is very important in global markets and its price is quite responsive to world events.
As a result LME traded copper futures, as a physical contract, is a very important hedging management tool for producers and consumers as well as a vehicle for speculative investment.
Lot sizes are 25 tonnes with a +/- 2% margin and the copper must be grade A cathodes which conform to BSEN 1978:1998 (an European Standard specifying the properties, composition and tolerances for copper rods for general use.)
Trading takes place in the ring by open outcry , with the first 5 minute session at 12.00, or you can trade electronically via an LME member.
The second 5 minute ring takes place at 12.30 and this is when the prices quoted form the official price for copper grade A futures contracts for that day. Looking to the future Over the longer term the emerging economies look set to continue demanding more grade A copper for economic expansion. We will for the foreseeable likely see news headlines like "China runs short of copper, looks to international markets to increase stockpiles". And with investment and pension funds looking to include a broad range of commodities in diversified portfolios, one can expect to see growing attention to the metals market in general and to copper futures in particular.
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