Copper Brass Supplement -- Copper: From Mining to End Markets

As with any scrap market, the market for secondary copper does not exist in a vacuum.

Copper wire may be scarcely making its way into the facilities of scrap processors, but the lack of scrap supply might be more than offset by ramped up output at the world’s copper mines. Even if brass mills and copper refiners are snapping up wire choppings as soon as they are processed, an oversupply of raw copper can offset this vigorous demand when it comes to establishing a price for secondary copper.

In addition to mining output, the fluctuating demand for copper and brass products provides the other key variable in copper pricing. The overall use of copper products in the U.S. has climbed steadily nearly each year this decade, despite a slowdown in the use of copper for telecommunications wiring. U.S. brass mills have increased their output each year in the 1990s.

MINE OUTPUT

According to many commodities analysts, a series of announcements in 1996 and 1997 regarding increased copper mining output was the primary cause of copper pricing’s tailspin last year. Nearly all of the mining companies followed through on their announcements, eventually producing a significant increase in copper inventories.

Figures from the International Copper Study Group, Geneva, Switzerland, show that world copper mine production rose by 3% (some 300,000 tons) in 1997. Global production of refined copper in 1997 exceeded consumption by 350,000 tons.

While the answer on the surface may seem simple—just shut down some mines—copper mining companies needed to fight for market share first before a few of them began making capacity cutback announcements in early 1998.

The low cost of copper in late 1997 and early 1998 did, eventually, result in a mine output decrease. Figures from the U.S. Geological Survey (USGS), Reston, Va., showed that average daily mine output at American copper mines decreased by nearly 7% in March of this year. Three large mines in Arizona—BHP’s Pinto Valley Mine and two mines operated by Cyprus Amax Minerals Co.—curtailed operations that month.

While to some observers the response of copper mining companies to new market conditions may have seemed slow, the “invisible hand” of the free market works at its own pace. Even with lower prices being offered for copper, mining companies are not going to voluntarily give up market share until or unless they are convinced the copper cannot be mined and sold profitably.

END MARKETS

The steady growth economy that has existed in the U.S. for much of this decade has been kind to several industries that serve as end markets for copper.  American consumers have been building new homes, buying electronic appliances and buying new cars and trucks. Businesses in the U.S. have also been expanding their facilities and building new plants and offices.

The building boom, the brisk automotive and truck sales, and the expansion of utility infrastructures have all been instrumental in helping copper wire mills and brass product mills fill on a steady basis  increasingly thick order books.

According to the USGS, 43% of the copper consumed by U.S. manufacturers in 1997 went toward building construction uses. The second largest segment was in the electric and electronic products industry, where 24% of the copper was consumed. The remaining one-third of copper was used by makers of industrial machinery, vehicle parts makers and vehicle manufacturers, and makers of consumer products.

RECYCLING‘S PLACE IN THE PICTURE

Approximately 15% of the copper consumed by manufacturers in the U.S. is made from obsolete scrap. In 1997, according to the USGS, 420,000 tons of copper was recovered from old scrap items. Another 930,000 tons of copper scrap was recovered directly from mills, smelters, ingot makers and other copper industry facilities.

The recycling of copper goes back thousands of years to some of the earliest pre-industrial societies. According to the Copper Development Association (CDA), Greenwich, Conn., an active recycling market was most likely responsible for the disappearance of one of the Seven Wonders of the Ancient World, the Colossus of Rhodes. No traces of the enormous statue remain, and speculation centers on the likelihood that it was melted down as a source for copper.

According to the CDA, nearly all applications for the red metal can utilize secondary copper in the manufacturing process. Only electrical wiring that requires maximum conductivity (and thus the highest degree of purity) may exclude scrap from being used. Cable and other wiring applications can accept a mix of primary and secondary copper, as can virtually all other copper applications.

The brass industry, similarly, depends on the re-melting of obsolete and prompt scrap to keep its feedstock pipeline full. As with copper, certain brass products cannot accept impurities while others are more tolerant.

The author is managing editor of Recycling Today.

Profile of a Metallic Element

The Copper Development Association, Greenwich, Conn., has identified more than two dozen industry segments that utilize copper in the manufacturing of their products.

Industry                                               Sectors Utilizing Copper

Building Construction: Building wiring; plumbing and heating; air conditioning commercial refrigeration; builders’ hardware; architectural/decorative

Electrical & Electronic Products: Power utilities; telecommunications; business electronics; lighting and wiring devices

Industrial Machinery & Equipment: In-plant equipment; industrial valves and fittings; non-electrical instruments; off-highway vehicles; heat exchangers

Transportation Equipment: Automobiles; trucks and buses; railroad; marine; aircraft and aerospace

Consumer & General Products: Appliances; cord sets; military and commercial ordnance; consumer  electronics; fasteners and closures; coinage; utensils and cutlery;                                                                                            miscellaneous

Source: Copper Development Association