Copper Roundtable Coverage

World Events May Shape 1990s Market

The copper market both domestically and abroad is being affected by overseas events. Learn how the experts analyzed these influences at the Institute of Scrap Recycling Industries’s Copper Roundtable in February.

Moderate Price Trend

During 1989, inventories remained at "historically low levels," according to Harold F. Nelson, senior vice president, Phelps Dodge Sales Co., Inc., New York City. In the near term, Nelson said, there are expectations of a modest buildup of copper inventories and, as a result, a moderating price trend "at the 90-cent level." He indicated that should there be an economic recession, it would result in increased inventories and "substantially lower prices." Any disruption of production, however, would have a disproportionate impact on the upward movement of copper prices, he added.

Nelson said he felt positive about copper's prospects into 1995, with modest growth of about I percent a year (the United States represents about 25 percent of world copper consumption). European copper consumption should remain strong, he noted, as a result of the rebuilding of Eastern European economies. "Domestic consumption in Japan and the continued infrastructure development in newly industrialized countries will mean increased copper consumption," Nelson pointed out. "I believe demand could and will be better than predicted," he concluded, "and supply disruptions will somewhat curtail production, which should lend overall stability to price levels of the 1990s."

Impact of High Metal Prices

High copper prices have helped bring back to health many producers and others in the supply chain, said Davis G. Anderson, president, Chicago Extruded Metals Co., Cicero, Illinois. While these high prices have been helpful to the fabricating end of the business, he said, they are also a "drug" that affects the industry. He emphasized that high prices are not unlike "the broader inflationary trends that allow us to report extraordinary short-term results--which have very little to do with whether real current performance is extraordinary or not and which may, in fact, hide serious long-term problems."

One of the results is substitution of materials, with engineers looking to plastics, powdered metals, sintered metals, and other competitive materials to replace copper. "Relatively high prices," Anderson noted, "trigger not only short-term changes, they trigger the R and D juices of every engineer who sees copper and brass as a target."

Anderson discussed worldwide competition and spoke up for free trade in copper and brass, hailing the recent EC action to free copper and brass scrap exports from rigorous quotas. He pointed out the need for quality improvement to satisfy customer needs.

New Markets Abroad for Scrap

A recent surge in Italian demand for yellow brass scrap may be typical of the anticipated demand for U.S. scrap that may develop in the 1990s, according to Sheldon F. Tauben, president, Metalsco, Inc., St. Louis. He sees this development as part of the economic rebuilding of Western and Eastern Europe. "It makes sense," he said, "that as the political environment improves, so should the U.S. direct-export prospects for copper scrap to Eastern Europe." However, he foresees competition with European merchants for sales of copper and brass scrap to Third World countries, largely as a result of the recent elimination of EC copper scrap export quotas.

Tauben also looked to Asia as a source of increasing scrap demand. If you add China, he said, "you have a Far Eastern trading bloc that greatly surpasses Europe in population and potential." Looking ahead, he noted that "we face the possibility in the next year or two that both domestic and foreign demand for copper and brass scrap will diminish."

A Copper Consumer's View

Every manufacturer that uses copper hopes for less volatility in the metal's price trend. "The uncertainty of copper prices has become an environmental fact of life that can obscure healthy competition in the marketplace," said Michael W. Fien, staff vice president and director of strategic materials, Penn Central Industries Group, Inc., Woodcliff Lakes, New Jersey. Speaking as a representative of a large copper consumer, Fien noted that "relatively little has been done to tailor copper contracts so that consumers can remain competitive in their markets."

In 1990, he said, emphasis "will continue to be put on quality production and a reduction of scrap generation. There is much chopping capacity in place or being planned. Unless processing and conversion charges are reasonable, alternate methods of scrap conversion will be found and ultimately in-house conversion will be the result." Challenging recycling problems, he added, include cable insulation and "copper mud," the residue obtained in wire drawing operations.

Environmental Challenges for Ingot Industry

Environmental demands being made on the brass and bronze ingot industry are challenging the efforts, ingenuity, and financial resources of companies in the industry, according to Ronald L. Schumann, executive vice president, I. Schumann & Co., Bedford, Ohio. He pointed out that if it becomes necessary to satisfy all these proposed regulations and to change from existing alloys to low-lead alloys, "the entire economics of the ingot, foundry, water meter, and plumbing casting business win be affected considerably." He said traditional red brasses provide "excellent, sound, pressure-tight castings and the lead content improves machinability. But more important, the production of red brasses allows for the use of auto radiators--and new alloys would require virgin metal equivalents, causing costs to increase dramatically."

Competition for copper-base alloy scrap has become more intense, Schumann said, pointing out that "refineries continue to compete with ingot makers for the entire spectrum of our raw materials." He highlighted a bright spot: increasing use of permanent-mold, low-pressure die castings and engineered bronze alloys is an area that provides growth encouragement.

A Copper Cost Study

About one-quarter of the world's primary copper is being produced for less than 40 cents a pound (not counting by-product credits), according to Harold W. Lynde, Jr., senior mineral economist, Pincock, Allen & Holt, Inc., Lakewood, Colorado. The next quarter costs between 40 cents and 50 cents a pound to produce; the third quarter between 55 cents and 65 cents a pound; and the balance up to about 95 cents a pound. "The weighted average is probably lower, between 45 cents and 50 cents, after by-product credits," he said.

World Events May Shape 1990s Market

The copper market both domestically and abroad is being affected by overseas events. Learn how the experts analyzed these influences at the Institute of Scrap Recycling Industries’s Copper Roundtable in February.

Moderate Price Trend

During 1989, inventories remained at "historically low levels," according to Harold F. Nelson, senior vice president, Phelps Dodge Sales Co., Inc., New York City. In the near term, Nelson said, there are expectations of a modest buildup of copper inventories and, as a result, a moderating price trend "at the 90-cent level." He indicated that should there be an economic recession, it would result in increased inventories and "substantially lower prices." Any disruption of production, however, would have a disproportionate impact on the upward movement of copper prices, he added.

Nelson said he felt positive about copper's prospects into 1995, with modest growth of about I percent a year (the United States represents about 25 percent of world copper consumption). European copper consumption should remain strong, he noted, as a result of the rebuilding of Eastern European economies. "Domestic consumption in Japan and the continued infrastructure development in newly industrialized countries will mean increased copper consumption," Nelson pointed out. "I believe demand could and will be better than predicted," he concluded, "and supply disruptions will somewhat curtail production, which should lend overall stability to price levels of the 1990s."

Impact of High Metal Prices

High copper prices have helped bring back to health many producers and others in the supply chain, said Davis G. Anderson, president, Chicago Extruded Metals Co., Cicero, Illinois. While these high prices have been helpful to the fabricating end of the business, he said, they are also a "drug" that affects the industry. He emphasized that high prices are not unlike "the broader inflationary trends that allow us to report extraordinary short-term results--which have very little to do with whether real current performance is extraordinary or not and which may, in fact, hide serious long-term problems."

One of the results is substitution of materials, with engineers looking to plastics, powdered metals, sintered metals, and other competitive materials to replace copper. "Relatively high prices," Anderson noted, "trigger not only short-term changes, they trigger the R and D juices of every engineer who sees copper and brass as a target."

Anderson discussed worldwide competition and spoke up for free trade in copper and brass, hailing the recent EC action to free copper and brass scrap exports from rigorous quotas. He pointed out the need for quality improvement to satisfy customer needs.

New Markets Abroad for Scrap

A recent surge in Italian demand for yellow brass scrap may be typical of the anticipated demand for U.S. scrap that may develop in the 1990s, according to Sheldon F. Tauben, president, Metalsco, Inc., St. Louis. He sees this development as part of the economic rebuilding of Western and Eastern Europe. "It makes sense," he said, "that as the political environment improves, so should the U.S. direct-export prospects for copper scrap to Eastern Europe." However, he foresees competition with European merchants for sales of copper and brass scrap to Third World countries, largely as a result of the recent elimination of EC copper scrap export quotas.

Tauben also looked to Asia as a source of increasing scrap demand. If you add China, he said, "you have a Far Eastern trading bloc that greatly surpasses Europe in population and potential." Looking ahead, he noted that "we face the possibility in the next year or two that both domestic and foreign demand for copper and brass scrap will diminish."

A Copper Consumer's View

Every manufacturer that uses copper hopes for less volatility in the metal's price trend. "The uncertainty of copper prices has become an environmental fact of life that can obscure healthy competition in the marketplace," said Michael W. Fien, staff vice president and director of strategic materials, Penn Central Industries Group, Inc., Woodcliff Lakes, New Jersey. Speaking as a representative of a large copper consumer, Fien noted that "relatively little has been done to tailor copper contracts so that consumers can remain competitive in their markets."

In 1990, he said, emphasis "will continue to be put on quality production and a reduction of scrap generation. There is much chopping capacity in place or being planned. Unless processing and conversion charges are reasonable, alternate methods of scrap conversion will be found and ultimately in-house conversion will be the result." Challenging recycling problems, he added, include cable insulation and "copper mud," the residue obtained in wire drawing operations.

Environmental Challenges for Ingot Industry

Environmental demands being made on the brass and bronze ingot industry are challenging the efforts, ingenuity, and financial resources of companies in the industry, according to Ronald L. Schumann, executive vice president, I. Schumann & Co., Bedford, Ohio. He pointed out that if it becomes necessary to satisfy all these proposed regulations and to change from existing alloys to low-lead alloys, "the entire economics of the ingot, foundry, water meter, and plumbing casting business win be affected considerably." He said traditional red brasses provide "excellent, sound, pressure-tight castings and the lead content improves machinability. But more important, the production of red brasses allows for the use of auto radiators--and new alloys would require virgin metal equivalents, causing costs to increase dramatically."

Competition for copper-base alloy scrap has become more intense, Schumann said, pointing out that "refineries continue to compete with ingot makers for the entire spectrum of our raw materials." He highlighted a bright spot: increasing use of permanent-mold, low-pressure die castings and engineered bronze alloys is an area that provides growth encouragement.

A Copper Cost Study

About one-quarter of the world's primary copper is being produced for less than 40 cents a pound (not counting by-product credits), according to Harold W. Lynde, Jr., senior mineral economist, Pincock, Allen & Holt, Inc., Lakewood, Colorado. The next quarter costs between 40 cents and 50 cents a pound to produce; the third quarter between 55 cents and 65 cents a pound; and the balance up to about 95 cents a pound. "The weighted average is probably lower, between 45 cents and 50 cents, after by-product credits," he said.