Why is Copper So Expensive?

 

Why is Copper So Expensive?

Whether you’re a serious copper stacker or this is your first purchase, you might notice something funny about the way prices are calculated for copper bars, rounds, and novelty products. Gold and silver coins, bars, and rounds are usually priced relatively close to the current spot price of each metal, except for numismatically valuable or rare products. But the spot price of a pound of copper is considerably lower than the price of a one pound copper bar. What gives?

The short answer is that the spot price of copper refers to the value of the unprocessed metal, which is often sold by the truckload to manufacturers, scrap yards, and infrastructure-supporting companies. In other words, large consumers of copper buy the metal for close to its market value, but investors who buy processed copper bars and rounds pay a significant premium. 

However, the real answer is a bit more complicated. Gold and silver are primarily used as investments, whereas copper derives most of its value from industrial usefulness. As a result, the vast bulk of global demand for copper comes from very large consumers who quickly eat up available supplies of the metal for things like plumbing, wiring, and other essential products.

On this page, learn more about why copper is valuable – and why copper products tend to sell at such high premiums over melt value.

Understanding the Spot Price of Copper

The spot price of copper refers to the current market value of a given amount of copper. Copper’s spot price is generally quoted in pounds. This is different than the spot price of gold and silver, both of which are typically quoted in troy ounces. Since most copper transactions are very large, it makes little sense to quote the metal’s spot price in troy ounces. 

Like the spot prices of other precious metals, the value of copper fluctuates daily. Copper is relatively common, especially when compared to gold, silver, and platinum, so most of its value is derived from the metal’s industrial use cases. Copper prices have more than doubled since 2016, making it one of the fastest-growing safe haven assets out there. 

If you plan to invest in copper, make sure to keep up-to-date with the precious metal’s current spot price.

Here’s Why Copper is Valuable

Metals like gold and silver are primarily valued for their beauty, investing capability, and rarity. This isn’t quite the case with copper, which is the 26th most abundant element in the crust of the Earth. You read that right – copper is actually one of the most common metals on our planet! But make no mistake; copper is still valuable, despite being relatively easy to find. 

Unlike rare precious metals like gold, silver, and platinum, copper’s value is primarily derived from its usefulness. The use of copper, particularly in tools, dates all the way back to 5,500 B.C., and the first examples of copper coinage and ornamentation go back even further to 8,000 B.C. 

Today, copper is used in a wide range of industries, and much of the metal’s global demand comes from infrastructural development. Copper is an essential component of some building materials, electrical cables, manufacturing tools, and more. This is how copper’s value outpaces its scarcity. Because copper is so useful, it trades for far more than similarly abundant but less useful metals.

Industrial, Bulk, and Retail Copper Pricing

One common question we receive is why copper bars and rounds sell for so much more than melt value. While the average silver bar may sell to retail consumers for a few dollars per ounce more than its melt value, one pound copper bars can sell for as high as five times more than the current spot price of copper per pound. As we touched on earlier, the answer to this common concern has a lot to do with why copper is valuable in the first place. 

Remember, most of the world’s copper doesn’t go to investors. Instead, equipment manufacturing and building construction alone account for around 58% of annual demand for copper, according to National Resources Canada. Infrastructure, transportation, and industrial applications make up around 42% of global copper demand. This leaves very little room for copper bars and rounds!

Because most of the world’s copper is eaten up by large manufacturing companies, these companies purchase massive amounts of copper at a time. Imagine truckloads upon truckloads of copper. Those are the buyers who are buying copper for near its current spot price per pound.

Overview: Why Copper Premiums Are So High

But for the average retail investor, buying a pound of copper means paying an additional premium for its processing, the labor involved in its designs, and an even higher premium as a penalty for not buying the metal in bulk. Think about it this way. Imagine that you own a copper mine and mine 2,000 pounds of copper in a month. One company offers to buy all 2,000 ounces at once, but you also have 2,000 separate offers for one pound of copper each. Which deal would you prefer to take? 

So why are copper premiums so high? Premiums for processed copper products, such as bars or rounds, are high because the spot price of copper is typically used by massive companies buying and selling thousands of pounds of copper at a time.

How to Save Money Stacking Copper

Copper premiums may be high because of the metal’s industrial usefulness, but there are several ways you can save money while stacking copper. Like with any other precious metal, the best way to save money is to buy bulk. Premiums tend to be lower for larger copper products, such as ten pound copper bars than for one ounce copper rounds.

Another way to save money on copper is to compare prices across multiple dealers. Because online precious metal dealers leverage relationships with smelters, scrap yards, and other companies, some may offer better prices on copper bars and rounds than others. Hero Bullion offers some of the lowest prices online for high-quality copper bars, rounds, and replica bullets. 

Generally, the more copper you buy at one time, the more money you’ll save. Most precious metal dealers use quantity-based pricing, which gives investors larger discounts for buying large quantities of a given product. If you can afford to buy dozens of pounds or more of copper, you can save a considerable amount of money while stacking the metal you love. 

Final Thoughts: Here’s Why Copper is So Expensive

If you’re used to seeing the tight bid-ask spreads in the silver and gold markets, it may be strange to learn that copper rounds and bars are almost always sold for considerably more than their melt value. The reality is that the spot price of copper per pound generally only applies to large purchasers, which make up the bulk of global demand for copper. 

Still, smart investors can save money while expanding their portfolios with high-quality copper bullion. If you haven’t already, be sure to check out Hero Bullion’s extensive inventory of quality copper bars and rounds.

You might also be interested in: 

• Should I Buy Copper Bars?
• Copper vs. Silver: What’s the Better Investment?
• Why Are Copper Bars So Expensive?