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Natural Resources Journal: The World Copper Industry: Structure & Economic Analysis, R. Mikesell

This book review summarizes Raymond Mikesell's book "The World Copper Industry: Structure & Economic Analysis". The book provides a comprehensive overview of the current understanding of factors influencing the global supply and demand of copper. These copper markets have been extensively researched in relation to issues of market structure, price volatility, and accommodating future growth. The reviewer concludes that Mikesell finds little evidence of oligopoly pricing in the industry. Proposals to stabilize copper prices through international agreements or stockpiles would likely not be effective and could harm foreign exchange earnings. Future copper industry growth requires substantial investment, particularly in developing countries, though pollution regulations and investment challenges may impact growth.

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Uziel González Aliaga
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156 views3 pages

Natural Resources Journal: The World Copper Industry: Structure & Economic Analysis, R. Mikesell

This book review summarizes Raymond Mikesell's book "The World Copper Industry: Structure & Economic Analysis". The book provides a comprehensive overview of the current understanding of factors influencing the global supply and demand of copper. These copper markets have been extensively researched in relation to issues of market structure, price volatility, and accommodating future growth. The reviewer concludes that Mikesell finds little evidence of oligopoly pricing in the industry. Proposals to stabilize copper prices through international agreements or stockpiles would likely not be effective and could harm foreign exchange earnings. Future copper industry growth requires substantial investment, particularly in developing countries, though pollution regulations and investment challenges may impact growth.

Uploaded by

Uziel González Aliaga
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Natural Resources Journal

20 Nat Resources J. 2 (Symposium on "Whither Environmentalism?")

Spring 1980

The World Copper Industry: Structure &


Economic Analysis, R. Mikesell
Albert M. Church

Recommended Citation
Albert M. Church, The World Copper Industry: Structure & Economic Analysis, R. Mikesell, 20 Nat. Resources J. 411 (1980).
Available at: http://digitalrepository.unm.edu/nrj/vol20/iss2/16

This Book Review is brought to you for free and open access by the Law Journals at UNM Digital Repository. It has been accepted for inclusion in
Natural Resources Journal by an authorized editor of UNM Digital Repository. For more information, please contact [email protected].
BOOK REVIEWS

THE WORLD COPPER INDUSTRY:


STRUCTURE & ECONOMIC ANALYSIS
By R. MIKESELL
Baltimore: Johns Hopkins University Press. 1979. Pp. 389. $24.00
Raymond Mikesell provides us with an all-inclusive review of cur-
rent knowledge about the factors underlying the domestic and world
supply and demand for copper. These markets have been researched
in detail in the past several years in order to provide information to
those concerned about three major policy issues: 1) whether the
existence of a few large firms means that the market structure is a
non-competitive one which calls for government regulation; 2)
whether prices which have fluctuated widely, trebling in the 1973-74
period and subsequently falling by over 50 percent only to break
again the $1.00 per pound barrier in 1979, can or should be "stabi-
lized through market intervention;" and 3) whether future growth,
because of the substitution of plastic and aluminum and the poten-
tial for increased recycling as well as increasingly stringent pollution
requirements, can be accommodated in accordance with the existing
distribution of productive capacity among developed and developing
nations with known and potential reserves.
Mikesell reviews the history of the industry and its associated
markets, the technology of copper production, descriptive and econo-
metric models of demand, supply and investment, and descriptions
and analysis of proposals and results of government intervention in
copper markets [The Intergovernmental Council of Copper Export-
ing Countries (CIPEC) cartel, proposals for international buffer stock
and supply management, expropriation and government participation
in mine ownership, and the 1977 proposed U.S. National Copper
Stockpile]. The bulk of this material is drawn from secondary
sources, although the author does include additional original research
and updates seminal studies with more recent data. Policy questions
are addressed, but the book is organized to conform with the scope
of separate industry studies rather than in accord with the policy
questions themselves. The result is disjointed at times; furthermore,
the question of pollution regulation, an important aspect of the in-
dustry because of high sulfur concentrations in most ores, is not
examined as completely as other areas.
With respect to the three major policy questions posed above, the
author concludes as follows: 1) the 1973-74 copper price increase
was an aberration, for otherwise copper prices have remained at the
high end of a band of constant real marginal costs as had been found
NATURAL RESOURCESJOURNAL [Vol. 20

for the 1920 to 1957 period by Herfindahl in his seminal study, and
there is little evidence of oligopoly pricing; 2) industry practice of
long term contracting at U.S. or world producer prices with relatively
few exchanges taking place at spot or future London Metal Exchange
or New York Commodity Exchange prices, and erratic expectations
have prevented future markets from stabilizing prices. Proposals by
developing countries for a cartel and for a buffer stock operation
aimed at stabilizing prices and export earnings would be detrimental
to foreign exchange earnings and probably would not work, and U.S.
"strategic" reserves proposed by Senator Pete Domenici would not
aid U.S. industry; 3) forecast copper industry growth requires an
investment of approximately $2.7 billion per year from 1977
through 2000, with one half taking place in developing countries in
order for them to retain present shares. This amount of investment
capital may be difficult for developing countries to raise, because of
past burdensome tax policies and expropriation and take overs at
below market prices. However, added requirements for pollution
control may force an increased degree of smelting in developing
countries.
Mikesell presents a thorough examination of the economics of the
copper industry which is particularly refreshing and enlightening in
its merging of descriptive material and pragmatic business decisions
with the economic theory of resource exhaustion.
ALBERT M. CHURCH
Department of Economics
University of New Mexico

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