The Castillo Copper (ASX:CCZ) share price is up 140% in 2020. Here's why.

Chinese demand for Australian commodities can make or break a company's share price. Here's why the Castillo Copper share price could fly higher.

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The Castillo Copper Ltd (ASX: CCZ) share price is up 2.13% after topping at 4.3% in late afternoon trading today. That gain is enough to put the company's share price up 140% year-to-date.

In comparison, the All Ordinaries Index (ASX: XAO) is still down 9% in 2020.

Castillo's share price was initially unfazed by the COVID-19 panic selling that gripped the ASX in late February. But in early March, the share price crashed 50% in a single day, down to 1 cent per share. The recovery began on 7 April. Since then, the Castillo Copper share price is up a whopping 395%.

What does Castillo Copper do?

Castillo Copper, as the name implies, is a metals explorer with a primary focus on copper. The company also hunts for nickel, zinc and cobalt.

Castillo's prime asset is the Cangai Copper Mine. Located in northern New South Wales, Cangai counts among Australia's highest grading historic copper mines. Castillo also has the Mt Oxide project in the Mt Isa district. Located in north-west Queensland, the area is known to be a copper-rich region. In addition, Castillo has prospects in Zambia, the second largest copper-producing nation in Africa.

Why could Castillo's share price run higher?

Just as gold explorers' share prices are closely tied to the price of bullion, so too are copper explorers' share prices linked to the price of copper. There are other factors involved, of course. Good management and an element of luck go a long way to aiding an explorer's share price.

But for a copper explorer like Castillo, the price of copper is a big factor in how well the share price will perform. Today copper is trading for US$6,789 per metric tonne, levels not seen since mid-2018.

The copper price is surging due to an increase in global demand, predominantly from China, along with falling global inventory levels. That explains some of Castillo's 2020 success. But the latest data in from China indicates that its copper demand remains at almost record levels. Copper imports in August were only slightly lower than July, which set a new record high.

Castillo's latest review, reported yesterday, of its Mt Oxide Pillar project also looked encouraging.

Commenting on the review, Castillo Copper's Managing Director Simon Paull said:

The ongoing geological review at the Mt Oxide Pillar continues to deliver dividends, with interpretation of the evidence highlighting potential prospectivity for structurally controlled copper mineralisation. This delivers another attractive target to investigate and cumulatively builds on the Mt Oxide Project's exploration upside.

If you're considering investing in Castillo, be sure to do your own thorough research. And remember that small-cap shares (Castillo has a market cap of $48 million) tend to be riskier than bigger shares. And certainly more volatile.

Over the past 12 months the Castillo Copper share price has traded as low as 0.6 cents and as high as 5.3 cents.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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