Commodity Exchanges Trading Copper

Copper producers (i.e., mining companies) sell their production to customers, who transform the copper into various shapes and alloys. The copper is then sold to downstream fabricators, who manufacture a variety of end-use products.

The copper producers and their customers come together at commodity exchanges, which provide all of the mechanisms and facilities needed to trade copper.

The London Metal Exchange (LME)
The Commodities Exchange/NY Mercantile Exchange (COMEX/NYMEX)
The Shanghai Exchange (SHME)

Copper is traded on three commodity exchanges: The London Metal Exchange (LME), the Commodities Exchange Division of the New York Mercantile Exchange (COMEX/NYMEX), and the Shanghai Metal Exchange (SHME). On the LME, copper is traded in 25-tonne lots and quoted in US dollars per tonne. On COMEX, copper is traded in lots of 25,000 pounds and quoted in US cents per pound. On the SHME, copper is traded in lots of 5 tonnes and is quoted in Renminbi per tonne.

The role of the exchanges is to facilitate the process of settling prices. Prices are settled by bid and offer, reflecting the market's perception of supply and demand of the commodity on a particular day. The exchanges establish a price for the present day, called the spot price, and a price for some specified time in the future, called the future price. The exchanges allow for trading futures and options contracts, which enable producers and consumers to fix a price in the future, thereby providing a hedge against price variations.

In this process, the participation of speculators, who are ready to buy the risk of price variation in exchange for monetary reward, gives liquidity to the market. A futures or options contract defines the quality of the product, size of the lot, delivery dates, delivery warehouses, and other aspects related to the trading process. The existence of futures contracts also allows producers and their clients to agree on different price settling schemes to accommodate different interests.

Commodities exchanges also provide for warehousing facilities that enable market participants to make or take physical delivery of copper, in accordance with each exchange's criteria.

* Source - International Copper Association