Exchange Rates and the International Trade in Metals: The Case of Copper

Abstract

The role of exchange rates in determination of the competitiveness of a nation's mineral industry is important, controversial, and not generally well understood. This paper attempts to explain the mechanics of exchange rate calculations as related to mining costs, illustrate various surrogrates for more exact calculations, and highlight some of the perplexing and controversial policy questions in this area. This paper concentrates on one industry—primary copper. However, much of the material presented is more general and applicable to other metals. Further, the paper is directed to supply-side issues, as these are of particular interest in the case of copper.