The Most Volatile Commodity of 2012: Copper

We don't make this pronouncement lightly. Nor do we do so in a truly scientific manner. Yet according to our sister site, MetalMiner, copper takes the metals cake as the most volatile commodity of 2012. As MetalMiner observes, "Copper earns the dubious distinction of 'most volatile metal' for 2012. And this comes as no surprise. MetalMiner's monthly Copper MMI® registered a value of 97 in January, on par with December's value ... the copper price has ended 2012 at nearly the same place where it started, despite double-digit volatility based on the supply/demand fundamentals and too much copper stock given slowing China demand (4.8% expected growth in 2013 vs. 7.8% in 2011)."

The case of copper in 2012 highlights the need for companies to become more strategic not only in how they think about sourcing commodities with suppliers (demand aggregation programs with vendors, mill-direct, distributions, etc.), but also how they consider taking risk off the table through physical and financial contracts. After all, even if the price ends the year exactly where it started (and customers believe that the price has not moved throughout the year), it does not mean that you haven't exposed your business to volatility throughout a 12-month period.

Where is copper headed in 2013? MetalMiner's Stuart Burns has a few thoughts: "The price has been held up by the supply market slipping into and out of deficit, unlike other industrial metals which are firmly in surplus. But apparent demand and real demand are two different things and if off-market stocks really are 5 million tons as he suggests, the market has, in reality, been in surplus for some time. The supply market is looking better now than for some years, so the true nature of demand in China, the world's largest consumer by far, is that much more critical to the future direction of prices."

- Jason Busch

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