Counting The Cost of Copper

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Counting The Cost of Copper

Earlier this year, the share prices of the world’s leading mining companies were on the rise. Evraz, saw its value increase by 6 percent whilst BHP Billiton, Glencore and Antofagasta all saw modest single-digit growth. The reason for this upward trajectory? Demand started to outstrip supply at a rapid rate.

Over the past year to March 2017, the price of copper on the global market rose by 12%, driven by the continued use of copper in electronic devices and a handful of geopolitical issues that have combined to reduce the availability of the conductive metal.

In February, workers at the Escondida mine in Chile, the world’s biggest copper mine, went on strike after talks regarding wages broke down. At the same time, the Grasberg mine in Indonesia also shut down due to a government dispute.

With less copper available to buy (as much as 2,700 tonnes per day according to The Times), shares in mining companies increased in value as financial markets hedged on reactionary purchases and a flurry of price rises.

Instances of industrial and state-led blockades would be a seen as a negative for the sector at the best of times, but the events took place at a time when the need for copper and other metals for manufacturing is at an all-time high. And demand is only set to increase: Freedonia, a market research firm based in Cleveland, Ohio, predicts that the global demand for copper is projected to rise by (at least) 4.2 percent per year through to the end of this decade.

Looking solely at the electronics industry, the rapid advancement of technologies has seen copper usage increase year-on-year to unparalleled levels. Due to its conductive properties, copper is used in a variety of electronic and electrical devices, from lithium-ion batteries and electromechanical components, through to the laminates used on printed circuit boards (PCBs).

With demand already beginning to outstrip supply, we have seen the price of copper – and in turn, products that require copper – rise: At the end of last year, the cost of the metal had increased from £1.71/lb to £2.02/lb.

Although copper’s value has remained relatively stable this calendar year, the 18 percent increase that we saw towards the end of 2016 has had an impact. Due to this, the cost of bare PCBs (of which copper foil is a key component) has gone up by a couple of percentage points – not a substantial rise, but a rise nonetheless.

Unfortunately, this upward trend is likely to continue for the foreseeable future. The European Institute for the PCB Community (EIPC) has predicted that the cost of copper-clad laminate could go up by 30 percent this year due to industry-wide demand. Invariably in most circumstances, this would have to be passed on down the supply chain.

A major reason for this spike is because copper foil is also heavily used in the manufacturing of lithium-ion batteries, a type of rechargeable battery that is predominantly used in mobile devices.

However, alongside its use in mobile phones and tablets, other industry sectors have started to incorporate lithium-ion batteries into their products as they move towards cleaner energy systems. Smartphones, robotics and now even electric vehicles all rely on rechargeable batteries. Because of this, there has been a run on copper foil, leading to global shortages.

Writing last month, Ventec, highlighted the deficit of raw materials: “The copper foil shortage has resulted in approximately 2.8 million sheets per month of copper clad laminate global material shortage. This is approximately two times the total rigid demand of the USA and Europe combined. We expect the situation to last at least until the middle/end of 2018.”

In conjunction with a slight increase in the cost of bare PCBs, many analysts have predicted that lead times will increase as manufacturers start to rebuild stock levels to a comfortable amount. Whilst we have not experienced elongated lead times, we cannot rule this out in the near future – especially on requirements outside of the industry norm of 1.6mm 35um (1oz).