Copper Price in the 1990s

Copper entered the decade under pressure, opening at $1.21 per pound in 1990 as the Gulf War and a mild recession weighed on industrial activity. Prices eased to $1.06 in 1991 and $1.04 in 1992 before sliding to a decade-early trough of $0.87 in 1993, when soft manufacturing demand and recession in Europe and Japan sapped consumption. The market then staged a sharp recovery, climbing to $1.05 in 1994 and peaking at $1.33 in 1995 as a synchronized global upturn, robust construction and electrical demand, and low exchange inventories tightened the balance.

The rally proved fragile. Copper fell back to $1.04 in 1996, the year the Sumitomo trading scandal erupted, and hovered at $1.03 in 1997 as the Asian financial crisis broke out. The real damage came in 1998, when prices crashed to $0.75 amid the Russian default and the collapse of hedge fund Long-Term Capital Management, both of which shattered risk appetite. Copper then slid to $0.71 in 1999, a near 12-year low, leaving the decade average at $1.01 and the full-decade change at negative 41.3 percent.

The defining shock of the mid-decade was the Sumitomo copper affair. Yasuo Hamanaka, chief copper trader at Japan's Sumitomo Corporation, had spent years trying to corner the market through London Metal Exchange futures, at one point controlling roughly 93 percent of LME copper warrants. When Sumitomo removed him in May 1996 and began unwinding the positions, copper on the LME plunged from around $2,800 per tonne to a two-and-a-half-year low near $1,800, and the company disclosed about $2.6 billion in losses. The episode removed an artificial prop from the market and exposed weak underlying fundamentals.

The deeper driver of the late-decade slump was the Asian financial crisis. Beginning in 1997, currency collapses across Thailand, South Korea and Indonesia crushed copper consumption throughout the region, dragging prices to multi-decade lows. The 1998 Russian default and the LTCM implosion amplified the sell-off across all industrial commodities, and copper bottomed near $0.71 in 1999. Only in the second half of 1999 did Asian demand begin to stabilize, setting the stage for the recovery that would explode into the China-led supercycle of the following decade.