The Cablemaking Raw Material Price Outlook Update

Commodities have taken a Hit, but are already beginning to Fight Back

Commodity prices, particularly those of the wire and cable industry’s most important conductor metals – copper and aluminium – took a very heavy hit from late-summer’s financial crisis. Both copper and aluminium prices on the LME fell as much as 25% at one point from the levels seen right at the beginning of August. However, it was clear by the end of the LME week in early October that the worst of that particularly phase of the crisis was past.

Copper is now trading close to US$8,000/t on the LME, and aluminium is close to US$2,200/t on a cash basis. Chinese imports of refined copper reached their highest level so far this year in September implying that China’s appetite for the red metal is unquenchable. Even if this is partly the result of copper scrap being denied to the market by scrap traders who paid elevated prices for scrap over the summer and are currently sitting on paper losses until prices make a complete recovery. The copper supply chain is already stretched with strikes at Freeport McMoRan’s Grasberg mine in Indonesia and the threat of a strike at its Cerro Verde mine in Peru. Meanwhile in Zambia two Chinese-owned Chambishi operations were also faced with strikes. Negotiations for annual contract premia have begun and are expected to be settled close to last year’s levels.

Aluminium pricing has been more stable and has taken its cue from macro-economic events rather than from aluminium industry and market conditions.

In the petrochemical market, the International Energy Authority recently said that oil prices are in the danger zone for the global economy at current levels. It warned that oil prices could hit US$150/bbl if investment in the Middle East and North Africa fails to rise with demand. The IEA wants more investment in green technology, warning that the world is heading down an “insecure, inefficient and high carbon path. Growth, prosperity and rising population will inevitably push up energy needs over the coming decades. But we cannot continue to rely on insecure and environmentally unsustainable uses of energy.” “If, between 2011 and 2015, investment in the Middle East and North Africa runs one-third lower than the US$100 billion per year required, consumers could face a near term rise in the oil price to US$150/bbl” said the IEA. We need to find two new Middle Easts, that’s a tall order.” Last week President Barack Obama agreed to allow further oil and gas drilling in the Gulf of Mexico and Alaska. The G20 meeting in France pledged to work towards an end to fossil fuel subsidies without specifying a timescale.

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