Copper has been one of the most important materials in the development of civilisation and continues to play a vital role in society today. Copper's chemical, physical and aesthetic properties make it a material of choice in a wide range of applications. It is ductile, corrosion resistant, malleable and an excellent conductor of heat and electricity. Because of these properties, copper has become a major industrial metal, ranking third after iron and aluminum in terms of quantities consumed. Building construction is the largest market for copper, followed by electronics, transportation, industrial machinery and consumer products. The majority of demand comes from the United States of America, Europe and China which in 2004 together accounted for over 55% of worldwide consumption.

Demand for copper continues to be strong given high levels of global industrial production with global industrial production growth levels in 2004 at their highest since 1976. However, mine production has been unable to meet demand due to constraints from mine depletions, declining ore grades, and tighter environmental standards. In addition, a dearth in exploration and development expenditures over the past decade and increased difficulty in finding and permitting new discoveries have contributed to supply side constraints.

As a result, over the past few years, consumption of copper has grown on average more than copper production. The International Copper Study Group (ICSG) estimated copper usage in 2004 at 16.5 million tonnes, which is a 5.7% increase over the previous year; however, refined copper production was estimated at 15,800,000, which is only a 3.7 % increase over the previous year. Overall, industry experts estimated a copper deficit of between 600,000 and 1,000,000 tonnes for 2005 which will be met by drawdown of inventories. The combination of stronger world demand and lower production has resulted in a deficit in the copper market since the beginning of 2003.

In response to the shortage of copper, inventories held at international warehouses declined in 2004 as copper prices rose. By the end of the year, the London Metal Exchange (LME) stock level was at 49,000 tonnes of copper, an 88% reduction from its level at the end of 2004 and its lowest level in 16 years.