Metals Update - March 2006
Copper & Zinc Hit Record Highs by John Temple
There has been much written recently about the increases in a variety of products within our industry. The cost of nonferrous metals, and in particular copper, aluminum and zinc, are major reasons for much of what we have experienced. Until 2004 these metals had lagged behind the run-up that plagued the steel market. However, in 2005 the price of these metals caught up and is projected to climb dramatically until 2007.
Copper
It’s one of the oldest commodities known to man and the world’s third most widely used metals behind iron and aluminum. It’s also critical to many industries and none more so than the electrical industry. In the July 2005 issue of the 3E Live Wire I asked the question, “What’s up with copper wire…besides the price?” At that time we were talking about decreased supplies and increased demand that caused all time highs of $1.67/lb for raw copper.
Here we are 9 months later and on March 31, 2006 raw copper hit a new record high of $2.52/lb on the COMEX. That’s a 51% increase over the levels we reported last year. There are several factors affecting copper prices and the following are just a few;
- Supplies are still generally lower than historical levels
- Demand is still high
- Since 2002 China has gone from being an exporter of raw copper to the world’s largest importer
- Chinese construction plans are expected to continue to increase
- A weak US dollar and the fact that much of our copper is imported
- Recent speculative trading is credited with driving prices even higher
- Numerous existing mines are increasing production, but the process can take years
- New mines are coming on line, but this is also is a lengthy process
What this means for the electrical customer is that the 12 THHN Solid that sold for $49.08/mft in December 2004 and sold for $64.78/mft in July 2005 is now priced at $90.39/mft based on the current levels.
Aluminum
As mentioned earlier, aluminum is even more popular than copper. The majority of the world’s production or approximately 30% is used in the transportation industry. The packaging and aluminum can business uses another approximately 20%. While the building and construction industry accounts for approximately 10% of the world’s aluminum usage.
This metal has also seen increases in value of late while not as drastic as copper. As of July of 2005 the average spot price was $0.78/lb. As of March 31, 2006 aluminum had risen to $1.12/lb, which represents a 43% increase.
Zinc
Now here’s one you probably haven’t thought much about. However zinc is used in numerous products within the electrical industry such as die cast fittings and weather proof boxes just to name a couple. It is also used as an anti-corrosive coating on various steel products.
The average price of zinc which was $0.48/lb in 2004 increased to $0.62/lb in 2005 and was projected to hit $0.80 and $0.90/lb in 2006 and 2007. However, the experts fell a little short in their forecasts. Zinc as recently as April of 2006 exceeded $01.50/lb. These increases began in 2004 when demand began to outpace supply and with projections of a 201,000 metric ton deficit in 2006 aren’t likely to diminish any time soon.
What does all this mean to you and your business?
It means that those price increases you’ve been seeing are likely to be followed by yet more price increases. It’s a challenging task to try and stay on top of and unfortunately no one has all of the answers. What I can tell you is that 3E and our sales team will do everything possible to keep you informed and competitive in this volatile market.
For more information please contact your 3E sales representative or call 800-955-3633.
