Investors seeking precious-metal exposure may want to consider adding copper to their portfolios. Institutional and retail investors alike have been loading up on another metal, gold, through ETF's such as the SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust ETF (NYSE: IAU). The investment has definitely paid off, and with the prospect of more quantitative easing and a weakening dollar, the trend remains gold investors' friend. Copper has also seen its price appreciate, but unlike gold, its value is rising because of its importance as an industrial metal in any type of economy.

Supply declines, demand stays strong
Over the first seven months of the year, the global consumption of copper stood at 11.23 million tonnes, which outpaced supply of 11.17 million tonnes. Production of the metal by large copper producers is also declining. The head of Rio Tinto's (NYSE: RTP) mining business Andrew Harding recently stated, "From a supply point of view, there are just not a lot of new stories out there. It would be hard to imagine what would cause a collapse in the copper price." Limited supplies in mines around the world have caused the company to slow production by about 5%, while competitor BHP Billiton (NYSE: BHP) saw production declines close to 20%.

Much of the slowdown in production owes to the decreasing quality of ore found in copper mines. Years of depressed prices made searching for new copper resources unprofitable for the large miners. So much of the production today comes from depleted mines that require greater costs to keep quality production on track. In addition, once new deposits are found, it takes years to begin producing copper for use. In the near term, any new findings won't be able to negate the additional demand.

Feeding China's hunger
China is one of the world's largest copper consumers. In the face of the financial crisis in 2009, China focused its massive stimulus package on continued infrastructure buildout, including a large investment in stockpiling copper.

Copper traders believe that China's State Reserves Bureau purchased between 250,000 and 300,000 tonnes of copper at about $3,500 per tonne. With prices now hovering around $8,350 per tonne, China is sitting on a substantial profit of close to $1.5 billion. If China begins to sell off much of its additional copper inventory, it could potentially slow the metal's price appreciation. However, China's copper usage is expected to continue to grow, and if the global recovery keeps accelerating into next year, I believe the additional copper will probably still not be enough to meet the increasing worldwide usage.

The way to play
(NYSE: FCX) is the largest publicly traded copper miner in the world, with estimated reserves worth more than $300 billion. However, I particularly like that the company is not just a play on copper. Freeport-McMoRan also has gold and silver reserves that amount to more than $55 billion. While copper sales still account for 75% of the company's revenue, the added revenue from gold and silver add important diversification to Freeport's top line.

Investors can also play increasing copper prices by investing in a country whose overall economy leans heavily on copper production. One such play is Chile, where copper represents about 50% of overall exports. Investors can gain exposure to Chile by purchasing shares in iShares MSCI Chile Investable Mkt Idx (NYSE: ECH).

Finally, if you're feeling less adventurous, iPath Dow Jones UBS Copper Total Return ETN (NYSE: JJC) tracks the price of the underlying commodity. If you're bullish on the price of copper, but don't want the company-specific risk, this is your best play.

Do you think demand for copper will stay strong?  Let us know in the comment box below.

Fool contributor Andrew Bond owns no shares in the companies listed. Try any of our Foolish newsletter services free for 30 days. 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.