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continuation on page 195
Lectu re Notes
in Economics and
Mathematical Systems
Managing Editors: M. Beckmann and W. Krelle
233
Gerhard Wagenhals
The World Copper Market
Structure and Econometric Model
Springer-Verlag
Berlin Heidelberg New York Tokyo 1984
Editorial Board
H. Albach M. Beckmann (Managing Editor) P. Ohrymes
G. Fandel J. Green W. Hildenbrand W Krelle(Managing Editor) H.P. KOnzi
G.L Nemhauser K. Ritter R. Sato U. Schittko P. Schonfeld R. Selten
Managing Editors
Prof. Dr. M. Beckmann
Brown University
Providence, RI 02912, USA
Prof. Dr. W Krelle
Institut fOr Gesellschafts-und Wirtschaftswissenschaften
der Universitat Bonn
Adenauerallee 24-42, 0-5300 Bonn, FRG
Author
Dr. Gerhard Wagenhals
Alfred Weber-Institut, University of Heidelberg
Grabengasse 14,0-6900 Heidelberg, FRG
ISBN-13: 978-3-540-13860-0 e-ISBN-13: 978-3-642-45585-8
001: 10.1007/978-3-642-45585-8
Library of Congress Cataloging in Publication Data. Wagenhals, Gerhard. The world copper
market. (Lecture notes in economics and mathematical systems; 233) Bibliography: p. 1. Copper
industry and trade-Mathematical models. I. Title. II. Series.
HD9539.C6W341984 338.2'743'0724 84-20198
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© by Springer-Verlag Berlin Heidelberg 1984
ACKNOWLED6EI'ENTS
The advice of Professor F. Gerard Adams in the preparation of this
report is very gratefully acknowledged. His helpful suggestions and
criticisms were invaluable. Without his guidance I could not have fin
ished this study.
Thanks are also due to all who have assisted with this report in
any way, through practical help, correspondence, useful suggestions and
a readiness to supply information. Especially I would like to thank Pro
fessor Jere R. Behrman, Professor J.D.A. Cuddy, Dr. Wolfgang Gluschke.
Professor Lawrence R. Klein, Professor Peter Pauly, Dr. Walter Sies and
Dr. Kenji Takeuchi.
Professor Malte Faber, Professor Hans Jurgen Jaksch. Professor
Jurgen Siebke and an unknown referee thoroughly read earlier drafts of
this study. They made many very helpful suggestions to improve its
contents and presentation.
The Deutsche Forschungsgemeinschaft very generously provided finan
cial support for a two-year visit at the Economics Research Unit of the
University of Pennsylvania. Philadelphia, where the main part of the
research for this book was done.
I would also like to express my deep appreciation to Chris Swan,
who not only corrected my English, but who always encouraged me during
my visit in Philadelphia.
Certainly, this study would not have been possible without many
helpful discussions and the steady support of my wife. Doris.
CONTENTS
Acknowledgements iii
List of Figures vii
List of Tables viii
Abbreviations xi
Introduction
Chapter 1 Introduction
1.1 The Importance of Copper 1
1.2 Objectives and Overview 2
1.3 Notes 4
Part II Structure of the World Copper Market
Chapter 2 Production
2.1 Metallurgical Background 6
2.2 Mine Production 7
2.3 Mine Production Capacities 11
2.4 Smelter and Refined Production 15
2.5 Scrap 19
2.6 Notes 22
Chapter 3 Consumption
3.1 Basic Facts 25
3.2 Copper Consumption 26
3.3 Substitution 28
3.4 Notes 34
Chapter 4 Trade and Prices
4.1 Trade 36
4.2 The Council of Copper Exporting
Countries 40
4.3 Prices 48
4.4 Conclusions 55
4.5 Notes 55
Chapter 5 Reserves and Resources
5.1 Copper Deposits 60
5.2 Perspectives of Copper Availability 65
5.3 Implications 69
5.4 Notes 71
VI
Part II: Econometric ~del of the World Copper Market
Chapter 6 Copper Market Models
6.1 Econometric Models 74
6.2 Other Copper Industry Models 79
6.3 A New Econometric Model 81
6.4 Notes 82
Chapter 7 Mine Production and Capacities
7.1 Overview 85
7.2 Primary SupplY: Theory 86
7.3 Primary Supply: Estimation 88
7.4 Mine Production Capacity: Theory 91
7.5 Mine Production Capacity: Estimation 95
7.6 Notes 98
Chapter 8 Demand
8.1 Overview 100
8.2 Consumption: Theory 101
8.3 Consumption: Estimation 102
8.4 Demand for Storage: Theory 104
8.5 Demand for Storage: Estimation 107
8.6 Notes 109
Chapter 9 Other Equations
9.1 Overview 110
9.2 Secondary Supply 110
9.3 Prices 112
9.4 Closing the Model 114
Chapter 10 Historical Dynamic Solution and Sensitivity
Analysis
10.1 Overview 117
10.2 Historical Dynamic Simulation 118
10.3 Mul t i plier Simulat ion Experiments 128
10.4 Concluding Remarks 131
10.5 Notes 134
Appendices and Bibliography
Appendix I General Remarks on Methodology and Data 135
Appendix II List of Variables 138
Appendix III Estimated Equations 148
Bibliography 161
LIST OF FIGURES
1-1 Simplified structure of the world copper model 5
2-1 Concentration ratios in copper mining, 1950-
1983 10
2-2 Copper world mine and refined production since
1900 18
4-1 U.S. producer price and LME price, electrolytic
copper, wirebars, 1980 constant U.S. $ per ton 49
4-2 Cumulated percentage shares of ten leading cop
per mining companies in their total copper out
put, United States, 1960 and 1980 52
4-3 Cumulated percentage shares of ten leading cop
per mining companies in their total copper out
put, Canada, 1960 and 1980 53
5-1 Average copper ore grade, United States, 1924-
1982 61
5-2 Estimates of the world's copper reserve base,
1950-1983 64
10-1 Dynamic simulation: Copper mine production, to-
tal world, 121
10-2 Dynamic simulation: Refined copper consumption,
total world 122
10-3 Dynamic simulation: Total copper consumption,
market economies 123
10-4 Dynamic'simulation: Production of refined cop-
per from scrap, market economies 124
10-5 Dynamic simulation: Refined copper stocks, mar-
ket economies 125
10-6 Dynamic simulation: Average annual price of
copper, electrolytic copper, wirebars, London
Metal Exchange, cash 126
10-7 Dynamic simulation: Average annual price of
copper, electrolytic copper, wirebars, U.S.
producers (f.o.b. refinery) 127
LIST OF TABLES
2-1 Shares in the total world's mine production of
copper ore 8
2-2 Shares in the total world's smelter production
of copper 16
2-3 Concentration indexes for the market economies'
smelter copper output 17
2-4 Shares in the total world's refined production
of copper 17
2-5 Concentration indexes for the market economies'
refined copper output 18
2-6 Shares in the market economies' secondary re-
fined copper production 20
2-7 Shares of secondary production in the total re-
fined copper production of selected countries 21
3-1 Shares in the total world's refined copper con
sumption 26
3-2 Concentration indexes for the market economies'
refined copper consumption 27
3-3 Shares in the market economies' total copper
use 27
3-4 Technical properties of copper and its substi-
tutes 29
3-5 Trend of copper prices relative to the price of
its main SUbstitutes, 1960-1980 32
3-6 Coefficients of price variation, 1960-1980 33
4-1 Shares in total world copper exports 36
4-2 Copper exports of main producers, 1970 and 1982 37
4-3 Net copper imports of major European consumers,
1970, 1980 and 1982 38
4-4 Composition of West European net copper imports
in 1982 38
4-5 East-West trade in refined copper 39
4-6 Dependence on CIPEC countries 41
4-7 Copper's share in exports revenues, average
1970-1980 42
4-8 Export commodities with higher growth rates
than copper exports, 1970-1979 42
IX
4-9 Copper's share in import value, average 1970-
1980 43
4-10 Copper producer associations 44
4-11 CIPEC's real copper export earnings, in billion
1975 U.S. $ 46
5-1 Distribution of world copper reserve base and
reserve! extraction ratio 62
5-2 World copper reserve base estimates since 1950 63-64
5-3 Linear and log-linear time trend of real copper
prices, 1954-1980 68
7-1 Estimated mine production e~uation, Zambia 89
7-2 Estimated mine production e~uation, United
States 90
7-3 Estimated mine production e~uation, centrally
planned economies 91
7-4 Estimated mine production capacity e~uation,
Zambia 95
7-5 Estimated mine production capacity e~uation,
United States 96
8-1 Estimated copper consumption e~uation, Federal
Republic of Germany 102
8-2 Estimated refined copper consumption equation,
centrally planned economies 104
8-3 Estimated refined copper stocks equation, Lon-
don Metal Exchange 107
9-1 Estimated secondary production equation, Feder-
al Republic of Germany 111
9-2 Estimated price equation, London Metal Exchange,
spot price 113
9-3 Estimated price e~uation, United States, pro-
ducer price 114
9-4 Estimated East-West trade e~uation 115
9-5 Estimated refined copper production e~uation,
United States 116
10-1 Accuracy statistics of the historical dynamic
simulation, 1956-1980 118-119
x
10-2 Dynamic simulation: Copper mine production,
total world, 121
10-3 Dynamic simulation: Refined copper consumption,
total world 122
10-4 Dynamic simulation: Total copper consumption,
market economies 123
10-5 Dynamic simulation: Production of refined cop-
per from scrap, market economies 124
10-6 Dynamic simulation: Refined copper stocks, mar-
ket economies 125
10-7 Dynamic simulation: Average annual price of
copper, electrolytic copper, wirebars, London
Metal Exchange, cash 126
10-8 Dynamic simulation: Average annual price of
copper, electrolytic copper, wirebars, U.S.
producers (f.o.b. refinery) 127
