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Direct Effect of TC on the LME Copper Prices

Author

Listed:
  • Byungkwon Lim

    (Korea Housing Finance Corporation, Pusan 48400, Korea)

  • Hyeon Sook Kim

    (Public Procurement Service, Daejeon 35208, Korea)

  • Jaehwan Park

    (Public Procurement Service, Daejeon 35208, Korea)

Abstract

The motivation of this paper is to identify the effect of treatment charge (TC) on LME (London Metal Exchange) copper prices. It is a fundamental variable as a supply side factor, because it is related to the smelting process and reflects the level of concentrates market tightness. To examine this question carefully, the regression model is applied. This paper finds a statistically significant negative link between TC and LME copper prices. It is found that a 10% increase in TC of copper decreases in copper return by 1.8%. Subsequently, the vector autoregression (VAR) model is introduced to consider the impact of TC to copper prices as a permanent effect. It is found that the negative impact of the TC to copper returns dies out quickly. The statistical estimation in this article will provide a good reference for future study.

Suggested Citation

  • Byungkwon Lim & Hyeon Sook Kim & Jaehwan Park, 2020. "Direct Effect of TC on the LME Copper Prices," Economies, MDPI, vol. 8(2), pages 1-9, May.
    • Handle: RePEc:gam:jecomi:v:8:y:2020:i:2:p:36-:d:354984
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    References listed on IDEAS

    as
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    2. Kegomoditswe Koitsiwe & Tsuyoshi Adachi, 2018. "The Role of Financial Speculation in Copper Prices," Applied Economics and Finance, Redfame publishing, vol. 5(4), pages 87-94, July.
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    5. Jaehwan Park, 2019. "The Role of Canceled Warrants in the LME Market," IJFS, MDPI, vol. 7(1), pages 1-10, February.
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    7. Jaehwan Park & Byungkwon Lim, 2018. "Testing Efficiency of the London Metal Exchange: New Evidence," IJFS, MDPI, vol. 6(1), pages 1-10, March.
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    Cited by:

    1. Byungkwon Lim & Hyeon Sook Kim & Jaehwan Park, 2021. "Implicit Interpretation of Indonesian Export Bans on LME Nickel Prices: Evidence from the Announcement Effect," Risks, MDPI, vol. 9(5), pages 1-7, May.

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    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G1 - Financial Economics - - General Financial Markets

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