Why Are The Copper Prices Increasing and What Does This Mean for The Wire And Cable Industry?
On February 25, 2021, copper prices reached their 10-year peak at $9,614 per metric ton, getting dangerously close to the all-time high of $ 10,190 that was reached in February 2011. As of the 8th of April 2021, the price per metric ton has dropped to $ 9,001.50, but it has remained within the same high plateau. In the last 6 months, copper prices went up 28 percent, which is unprecedented.
Since copper is a very viable metal in cable manufacturing due to being a popular material for cable conductors, wire prices will likely be affected if the trend continues. On a brighter note, copper prices have been long thought of as an indicator of economic health, so this gives the world hope for a faster-than-thought economic recovery amid the global coronavirus pandemic.
Will the price remain high in the foreseeable future? Let's analyze the factors influencing copper prices to make a right prediction.
What Caused The Copper Prices To Surge?
Many factors traditionally affect copper prices, including the value of the US dollar, oil prices, economic activities, speculation, copper stock market markets. Traditionally, supply and demand have been the main factors affecting the value of copper. In recent years, global market trends have become a valuable factor due to the rapid urbanization of Asian countries like China and India, which surged the demand for copper in these countries. In general, the demand in China is the most relevant global market trend that predicts copper prices because the demand for the metal has been steadily high in the country for the last few decades. The current surge in copper prices is different from other historical fluctuations and is caused by a combination of unique factors. So, what are they?
Issues With Supply Due To Covid-19 Pandemic
As of the first quarter of 2021, copper remains in short supply because of the problems with mining operations caused by the raging Covid-19 pandemic. Global copper production comes from the Americas, Europe, and Asia and is mainly concentrated in countries like Chile (28%), Peru (12%), China (8%), and the United States (6.5%). These countries have been heavily affected by the pandemic, with China recovering its economy ahead of others. Covid-19 mass vaccination will likely solve the issues with supply, but the result wouldn't come fast despite the successful vaccination campaign in the USA, as Peru has managed to vaccinate only above 1 percent of its population as of April, Chile experiences a significant surge in Covid-19 cases despite having vaccinated 22.4% of its people.
Rising Demand For Copper In China
While rising demand in China has been a trend for years, it has become a ticking time bomb for copper prices when combined with the shortened 2020-2021 supply. As of 2021, the country consumes about 50 percent of the world's copper, and its rapid economic growth means that the demand can rise even further in the future. China's switch to renewable energy is also a factor in the rising demand.
Global Demand Growth Linked To Renewable Energy
The connection of copper to renewable energy is a surge factor of its own, even without taking China into consideration. Companies in governments across the world continue to invest in solar, hydro, and wind energy in hopes of pursuing sustainable energy production. In 2019, a global renewable energy sector experienced a 12.2% increase, and the growth continues despite the challenges linked to a global pandemic. Due to being highly efficient, copper is the critical metal for renewable energy. Therefore, the demand for it is expected to grow for years to come even -and especially - if we completely remodel our energy consumption.
Will The Prices Stabilize Or Come Down?
While the supply issue is likely to resolve in 2022-2023 as we overcome the pandemic with mass vaccination, the growing demand is not going anywhere. This, perhaps, means that the prices will stabilize eventually, but they are unlikely to come down to pre-pandemic levels in the upcoming years.
Analysts at Goldman Sachs believe that the copper prices will remain within the current range for the next year, likely reaching their record high in late 2022. This will be driven both by growing demand and the recovery of the global economy after the pandemic. However, the restored supply will likely make the prices rise at a steadier pace than what we saw in 2021.
I Am Planning An Electrical Project. What Should I Do?
If you are a frequent consumer of wire and cable products, you probably noticed that products' prices have increased in the first half of 2021. The cost of copper is a key factor there, along with rising prices for other metals and raw materials.
Copper conductors are durable and highly conductive, so there is no way for them to ever be entirely replaced in the wire and cable industry. However, modern aluminum cables, which are up to 50 percent cheaper, can replace copper in many applications. So, if you feel that the price of copper cables is a burden for your electrical project, consider buying high-quality XHHW, SER, SEU, RHH RHW-2, or XLP USE-2 aluminum cables.
If there is no alternative to copper in your electrical project, look for the best prices on the market. At Nassau National Cable, we partner directly with top cable manufacturers all across the United States, which gives us an opportunity to set lower prices compared to other sellers. Therefore, we give you an opportunity to buy top-quality copper cables at a lower price than you might expect.
