According to the principle of microeconomics, when the supply of a commodity exceeds the demand, its price falls, and vice versa. At the same time, price will affect supply and demand in turn, that is, when the price rises, supply will increase and demand will decrease, on the contrary, demand will increase and supply will decrease. This basic principle fully reflects the internal relationship between price and supply and demand.

Inventory change is the dominant factor to understand copper supply. The futures exchanges that have great influence on the market mainly include Shanghai Futures Exchange (SHFE), London Metal Exchange (LME) and the New York Mercantile Exchange.

2. Macroeconomy

Copper is an important industrial basic raw material, and its demand change is closely related to economic growth. When the economy grows, the demand for copper increases, thus pushing up the price of copper. When the economy is depressed, the demand for copper shrinks, which pushes the price of copper down. Under normal circumstances, the market will take the economic growth rate, industrial production growth rate (added value) and related monetary and industrial policies as the important analytical basis for the changes in the macroeconomic situation.

3. Exchange rate fluctuations

Copper is a highly liquid commodity. In international trade, under normal circumstances, the change of the exchange rate of the local currency of non-US dollar countries against the US dollar will directly affect the cost and profit of copper trade, which will lead to the change of trade activities and the change of supply and demand, which will lead to the fluctuation of copper prices.

4. Production cost

Production cost is the basis of measuring commodity price level. When the copper price is lower than the production cost of copper for a long time, it will often lead to a sharp reduction in production of copper, mining and smelting enterprises, thus changing the relationship between supply and demand in the market and causing a sharp fluctuation in copper prices. Copper smelting methods are divided into pyrometallurgy and hydrometallurgy, and different smelting methods will also produce different production costs.

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