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Dynamic relationship between refined and scrap copper prices

Author

Listed:
  • Nilza Rivera

    (Universidad de Antofagasta)

  • Juan Ignacio Guzmán

    (Pontificia Universidad Católica de Chile)

Abstract

In this paper, we explore the relationship between refined and scrap copper prices, considering the possibility that this relationship may vary across various products and over time. Building upon the conjecture put forth by Phillip Crowson (Miner Econ 24(1):1-6, 2011), here referred to as the Crowson Conjecture, our study aims to investigate how the substitution between refined copper and copper scrap No. 1 and No. 2 can impact the prices of each other. To achieve this, we develop a theoretical model that allows us to understand the potential influence of substitution between refined copper and copper scrap No. 1 and No. 2 during different time periods. Additionally, we conduct an empirical test using monthly time series data spanning from January 2004 to June 2022, analyzing structural breaks in these prices. Our empirical analysis successfully identifies three distinct structural breaks: January 2004 to August 2009, September 2009 to July 2017, and August 2017 to June 2022. These breaks serve as critical time periods for measuring Granger causality between the examined prices. Interestingly, our findings indicate that the causal relationships between the refined and scrap copper prices change throughout these three analyzed breaks, providing evidence in support of Crowson Conjecture. By shedding light on the evolving nature of the relationship between refined and scrap copper prices, our study contributes to a deeper understanding of the dynamics within the copper market. These insights have implications for market participants and policymakers, enabling them to make more informed decisions regarding pricing and resource allocation strategies.

Suggested Citation

  • Nilza Rivera & Juan Ignacio Guzmán, 2024. "Dynamic relationship between refined and scrap copper prices," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 37(2), pages 381-392, June.
    • Handle: RePEc:spr:minecn:v:37:y:2024:i:2:d:10.1007_s13563-023-00401-2
    DOI: 10.1007/s13563-023-00401-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Structural breaks; Causality; Copper scrap; Price transmission; Secondary production;
    All these keywords.

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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