A Price Formation Mechanism of Metals and Its Application for Copper.

Abstract

The instability in metal price is a very serious problem in the metal industry. There are many factors such as depletion of mineral deposits and exogenous shocks represented by wars and worldwide business fluctuations determining the phases of price increases or decreases. Resource economists have mainly focused on theoretical models which often ignore unexpected shocks on demand, while mining engineers have regarded exogenous shocks as an important factor to explain metal prices. In this study, a combined model is propos ed. This model was examined by using the actual trends in copper prices between 1945 and 1993. This model predicts that the price of copper will fall in the near future.