Toward a Neutral Long ? Term Copper Price

THE INSTABILITY of copper prices and their low levels since late 1974 are of great concern to both producers and, to a lesser degree, consumers of copper. The price levels portrayed by the "neutral long-term" price trend are assumed to have been enough to encourage sufficient investment to provide adequate world production capacity and yet not so high as to encourage development of excessive over capacity. The identification of the present level of this trend has taken on special importance for governments and for corporations active in the world copper industry. One approach to the possible determination of such a price is through the use of moving averages. In this way, the effects of relatively short-term price movements can be dampened, as can those related to business cycles. From such averaged price data, long-term trends can be sought over a selected time period. The choice of the past time period for which a price trend is sought may have a major effect on the result'. For example, in the period 1885-1973, the long-term price trend for copper in constant dollars showed a decline, whereas in the period 1919-1973 it was rising. For the purposes of discussion, an appropriate choice of period might be a relatively short and recent one so that the majority of the present cost factors would be present throughout. It should also be long enough to cover a number of full business cycles.