Why Are Copper Bars so Expensive?

 When we talk about precious metal premiums, the conversation often focuses primarily on the three most popular bullion types – silver, gold, and platinum. But there’s another metal that Hero Bullion sells, a metal with extreme durability, exceptional flexibility, and a number of important industrial use-cases. Unlike platinum or gold, which are intrinsically valuable, almost all of copper’s value comes from its use in industrial products. 

To some buyers, this makes it one of the best metals to invest in. Smart investors are able to use platinum to diversify their portfolios and avoid the volatility associated with expensive precious metals. But copper bars also come with unprecedented and often unpredictable premiums over spot price. Why are copper bars so expensive? We’ll discuss several reasons why copper bar premiums are high, and why some investors ignore outrageous premium costs and continue to bet on copper bullion products. 

Factors Influencing Copper Bar Prices

So why are copper bars so expensive? We can pinpoint three potential reasons for the high premiums associated with copper bars: limited availability, increasing industrial demand, and a high cost of production. If you don’t understand these pricing factors, there’s no need to worry; we’ll discuss all three of them below. 

Limited Natural Resource Availability

While the global supply of copper is relatively high compared to precious metals like platinum, copper is really only ever mined in remote, difficult-to-access places. Utah, China, and the Democratic Republic of Congo are three major producers of copper bullion. Even though the mining apparatuses in these areas facilitate massive extraction efforts, the limited availability of copper contributes to its high prices. Why are copper bars so expensive, if there’s a lot of copper in the world? The answer lies in global demand. 

Increasing Demand from Various Industries

Supply is only one part of the equation. When we pair supply with demand, we can paint a more realistic picture of the answer to the question: why are copper bars so expensive? Industries like automotive manufacturing, electrical, and engineering can never get enough copper bullion. These industrial applications are key to the overall value of copper. 

As demand continues to increase and production steadies, the price of copper could continue to rise. Think about it this way. Each year, a certain amount of copper is produced and refined for industrial use. If a popular new vehicle that requires a ton of copper is released, the demand for copper spikes as well – and so does its price. 

Cost of Mining and Production

Compared to other precious metals, copper bullion is extremely difficult and expensive to mine. The copper mining business is considered capital-intensive. This means that it requires quite a bit of fiat cash to start – and run – a copper mine. Even after the mine is created, the costs of mining and producing copper products is extraordinarily high. Why are copper bars so expensive now? 

The capital cost of running a copper mine continues to increase, too. From 2021 to 2022, Australian Mining finds that the cost of mining one ton of copper spiked by 7% from 2021 to 2022. And while production at large copper mines is projected to increase to meet hefty demand from industrial sectors, the prohibitively high cost of running a mine certainly contributes to the high consumer-side premiums on products like copper bars. 

Supply and Demand Dynamics

As we discussed above, supply and demand play important roles in the total value of copper as a commodity. We’ll outline three main reasons for the increasing global demand for copper below: global infrastructure development, renewable energy applications, and copper’s role in technological advancements. So why are copper bars so expensive, anyway? Let’s take a look at supply and demand dynamics. 

Growing Global Infrastructure Development

Copper is most frequently used in electrical industries. This makes it one of the best materials for investors who are bullish on global economic and infrastructure development. The 21st century has led to the creation of new ways to develop infrastructure in developing countries. As the developing world continues to develop better infrastructures for their citizens, the global need for copper is only going to increase. 

If you’re anticipating that global infrastructure development is going to continue to grow in the coming decades, copper is an unprecedented investment opportunity. The evidence lies in copper price trends; over the past decade, copper has appreciated in value significantly. Why are copper bars so expensive? The industrial use of copper in infrastructure development tells us the answer to this question. 

Renewable Energy Applications

The metal we’re focusing on in today’s article isn’t just used to make electrical systems and streamline infrastructural development. Copper is also used in a wide range of important renewable energy technologies, including turbines, transformers, power electronics, and more. As the world becomes increasingly committed to sustainable, renewable energy, copper’s industrial applications will continue to expand. 

Why are copper bars so expensive, and how does this relate to renewable energy applications? Global demand for copper bullion has been expanding for a couple of decades, and leading environmental scientists predict that the global implementation of green energy will only grow. This means good things for copper, which is a core component in some of the world’s most essential green energy technologies. 

Copper’s Role in Technological Advancements 

For investors interested in the role of technology in their portfolios, copper is an excellent choice. Regardless of specific tech trends, any technological advancement at all is likely to result in more expensive copper. This is because copper is used in almost every technology, and in almost every technological manufacturing process. 

Why are copper bars so expensive right now? When technological innovators are on the move and making more products for consumers to enjoy, industrial demand for copper bullion increases – and prices do, too. 

 

Market Speculation and Investment Demand 

Speculating in the copper market is difficult, much like speculation in any precious metals industry. Why are copper bars so expensive, despite its industrial importance? In addition to functioning as a commodity, copper serves as a hedge against inflation and a vehicle for speculation and trade. We’ll cover market speculation in the copper market below. 

Copper as a commodity Investment

Why are copper bars so expensive as a commodity? Copper is most commonly traded as a commodity. Investors buy platinum not because the material is rare or beautiful, but because they are optimistic about copper’s industrial applications in manufacturing, industry, and green technology. This isn’t the only reason why copper is an increasingly attractive investment around the world, but it’s a major justification for the metal’s enduring popularity. 

Hedge Against Inflation and Economic Uncertainties 

Many investors use copper, like silver and gold, as a hedge against inflation. During times of economic uncertainty, precious metals can be a bulwark against inflation and economic collapse. Holding a valuable industrial material can help you avoid the pitfalls of worsening economic conditions. Why are copper bars so expensive? Their role as a hedge against inflation is a major reason why. 

As far as a hedge against economic insecurity is concerned, copper might not be the best possible choice. After all, copper’s price action is at least partly dependent on global economic and infrastructural development. If global economic conditions worsen, this isn’t great news for the industrial applications that copper is known for. 

Speculative Buying and Trading Activities

Traders also buy and sell copper on speculation. Some consumers view copper as a good way to make short or long-term gains. For investors in copper, general market speculation helps answer the question, “why are copper bars so expensive?” Unfortunately, it can be hard to time this part of the market. How do you know when industrial actors are going to speculate and bet on the price of copper? 

Developing a strategy for researching price trends and market sentiment can help you determine the investment value of copper. 

Processing and Refining Costs

The process for mining copper is extremely difficult and cost-intensive. But once copper is mined, it still needs to be refined and processed in order to bring you the copper bars you love. Why are copper bars so expensive? High costs associated with processing and refining copper are responsible for its extreme premiums. 

Energy-Intensive Extraction and Purification Processes

Mining copper requires quite a bit of energy and resources. Take a look at the statistics we provided toward the beginning of this article. Prices for mining a ton of copper have skyrocketed in just twenty years, and researchers suggest that they will continue to rise in the future. Why are copper bars so expensive? They’re extremely costly to make, so they also cost a lot on the consumer end. 

Environmental Regulations and Sustainability Efforts

Governments of the world are working to make our environment safer and more sustainable. While we highlighted copper’s importance to green energy efforts. But the copper mining process is also disastrous for the environment, according to some scientists. Copper mines are huge, destroying the land around them. Some evidence even suggests that copper mines can be harmful to overall human health for the people that live around them. 

Some government leaders have actually banned copper mining, which is clearly not great for the overall global supply of the commodity. Why are copper bars so expensive, despite environmental regulations? Some copper investors are bullish that industrial demand will continue to outstrip supply, even if copper is becoming increasingly regulated by governmental organizations.  

Labor and Operational Expenses

Operational expenses account for a significant portion of the total cost of running a copper mine. In addition to the capital required to start the mine and the energy necessary to keep it going, copper mine operators need to pay their staff for labor. These costs quickly add up. Why are copper bars so expensive? The high premiums you pay for a copper bar start with the extreme costs required to run the mine that your copper is sourced from. 

Global Economic and Political Factors

Just like with most precious metals, copper’s price is dependent on a number of complicated global economic and political factors. We don’t have the time to explain all of the factors behind the spot price and premiums of platinum bars, so we’ll highlight three: currency fluctuations, supply disruptions, and market speculation. 

Currency Fluctuations and Trade Policies

Why are copper bars so expensive during periods of currency fluctuation? Copper’s base price follows similar trends to other precious metals. In other words, diminished investor faith in traditional fiat currencies tends to benefit the value of copper. When the United States Dollar is weak, non-correlated assets like copper, platinum, gold, and silver become more valuable. 

This isn’t always the case. Trying to time the global economic market can be tricky, and we recommend doing your own research before diving into copper investment. 

Geopolitical Tensions and Supply Disruptions

Like any other investment, copper can lose or gain value depending on a number of geopolitical factors. Why are copper bars so expensive right now? Tense relationships between key members of the global copper supply chain, including the United States and China, could be to blame for high copper bar premiums. 

Market Speculation and Investor Sentiment

We spoke briefly about investor sentiment and market speculation earlier in this article. It’s important that investors understand that copper bar prices can shift at a moment’s notice, and that not all of the signs of quick price action are easy to judge. During some periods, investor interest in copper skyrockets, which can impact its price. 

Developing relationships with other investors and information sources can help you make a more informed investment decision about copper bullion. 

Final Thoughts: Why Are Copper Bars So Expensive? 

Let’s answer the question: why are copper bars so expensive? The high price of copper can be attributed to several factors, including industrial applications, environmental regulations, and general market speculation. 

Hero Bullion offers a number of quality copper bars to help you build your copper stack. If you still have questions about how to invest in copper bars, please contact our customer service team. We’re here to help you improve your investment portfolio with high quality and beautiful copper bullion bars.