The 12 worst investments of 2014, #7: copper

Decline in 2014: – 15.10%

See all 12 of 2014’s worst investments here

What happened?

The commodity markets have dropped substantially and with relatively little fanfare in 2014. Prices for basic, non-precious metals have plummeted, and copper has been the worst affected – it has shown a decline of more than 15% in 2014. Much as the price of oil has been forced downwards by a supply glut, so too has copper, which is used for making everything from wires and electric motors to saucepans.

According to Reuters, the Australian Bureau of Resource and Energy Economics predicts there will be a global supply surplus of over 300,000 tonnes, and some believe that the excess will take many years to clear up. Jesse Colombo of Forbes argues that, while global supply of copper is set to go up by 7% by 2017, demand will fall by 5% next year.

Who are the losers?

Mining firms and their workers all over the world are being affected by the drop in copper’s value. Employees at the Antamina mine, Peru’s largest, have just returned to work following two strikes over pay cuts, which had been directly caused by copper’s falling price. In Botswana, Discovery Metals Ltd is being forced to stop copper mining operations – putting over 500 jobs in jeopardy – as falling prices have made any activity unsustainable.

Who are the winners?

40-50% of copper in China is used in the construction industry, and falling costs mean that Chinese houses will keep getting cheaper. But this trend may not last. Copper Investing News points to Bank of America Merrill Lynch’s prediction that demand for will jump 20% by 2017.

What have we learned?

The economy is topped with a copper roof.  When copper falls, everything else goes with it.

See all 12 of 2014’s worst investments here