26 mars 2008
Brace for an increase in connector prices
Connector suppliers say it's likely that they will have to increase prices this year because of increased costs for precious metals and plastics.
"We continue to see rising raw materials costs most specifically for gold,” says Peter Krehbiel, president, connector products division, Molex Inc. in Lisle, Ill.. “We anticipate price increases this year due to rising costs for precious metals and resins." The last price hike implemented by Molex was last summer.
Tyco Electronics' Communications, Computer and Consumer Electronics (CC&CE) business unit implemented 5% price increases for some products in certain segments on Jan. 1. Additional price hikes are under evaluation.
Tyco has felt the impact of rising metal and oil prices. Gold is used in connectors and oil has impacted the price of plastics that Tyco also uses.
“We've been hit with some pretty good increases over the past several months and how this is going to impact us is a little tough to tell right now," says Jeff Brown, director of product management for the CC&CE business unit for Tyco in Harrisburg, Pa.
Brown says the biggest material cost impacts have been for palladium and gold, which are used heavily in the connector industry as plating materials. "Over the last few months we've been hit on multiple fronts with a lot of the raw materials we use," he says.
Despite having very focused programs in both manufacturing and engineering groups to reduce costs, Brown says it's getting more difficult to find ways to improve efficiencies and cost to offset those raw material price increases.
21 mars 2008
Import cutback by China to loosen copper supply
World copper supply may loosen this year if Chinese analysts are correct in predicting that the country’s net copper imports may fall by 10% this year from 2007 to 1.22 million metric tons. Meanwhile, short-term copper prices have tumbled to a three-week low as fears of a looming U.S. recession continue to spark a global market sell-off of stocks and futures.
The subscriber-only NymexDirect newsletter says that Maike Futures Brokerages’ deputy general manager, Shen Haihua, told the recent 2008 Base Metals Market Outlook forum that full-year refined copper imports will be 1.32 million metric tons, down from 1.48 million in 2007, while exports may fall to 100,000 metric tons from 124,000 last year. Shen forecasts there will be a 12% growth in domestic production to around 3.89 million metric tons, which should absorb a projected 8% increase in domestic consumption to 5.13 million metric tons. (The 2007 copper consumption total was around 4.74 million metric tons, a 22% gain from 2006 use.)
Meanwhile, the world copper price fell today back toward a $3 annual price average. It had jumped to $3.13/lb on Tuesday because of the aggressive rate cut of 75 basis points by the Federal Reserve in a bid to prevent the economy from sliding into recession. The 2008 consensus forecast for copper cathode is closer to $3/lb than last year $3.25, a projection endorsed by Xavier Garcia de Quevedo, the head of Mexico's Mining Chamber of Commerce, who sees cathode averaging $3, according to the Denver Post.
The Globe and Mail newspaper in Toronto suggests that slowing growth in the U.S., the world's biggest economy, could hurt demand for metals. Industrial metals have been focusing on movements in global financial markets in recent weeks rather than on supply and demand fundamentals. “Fundamentals really had little to do with any of ... (the) moves,” Standard Bank said in a research note. “Instead, the metals again looked to technical signals, the rest of the complex and the wider global markets for direction.”
Codelco to expand copper mining capacity
After some news sources report its annual output declined in 2007, Chilean copper miner Codelco plans to increase capacity in 2008 by upping its capital spending to $2 billion, up from $1.69 billion last year. Of that, $241 million will go to its new mine in Gaby due to start production in March, pumping out 100,000 metric tons of copper this year.
Codelco said this week its biggest risk to production is lack of energy. Bloomberg reports that energy prices in Chile, the world's largest supplier of copper, surged 29% in 12 months because of a shortage of natural gas from neighboring Argentina.
Copper prices in the U.S. hit their highest point in three weeks after the reports of Codelco’s reduced output hit the market to combine with weather-related concerns in China and lower stockpiles on the London Metal Exchange.
"It's a combination of these copper-specific fundamentals against the macro, and certainly with copper prices at $3.45/lb, the macro is losing," said Bill O'Neill, managing partner of LOGIC Advisors in a recent Reuters report.
Copper outlook for 2008 is a fourth year of reduced demand
Copper buyers will have less trouble sourcing the red metal this year as a succession of bad news on the economy—including poor bank earnings, falling construction rates and rising expectations that overall gross domestic product (GDP) growth will slow—is driving many copper market watchers to revise their 2008 copper demand forecasts. U.S. copper consumption for construction and manufacturing has been sliding for the past two years. Last year, the U.S. and Canada consumed an estimated 5.4 billion lbs of copper, a 3% decline from the year before, and new outlooks for 2008 see further slippage. "Copper demand is probably falling 8% per annum in the U.S.," says Jon Bergtheil, head of global metals strategy at the J.P. Morgan Securities offices in London. Not quite as bearish is Larry Edelson at Weiss Research in Jupiter, Fla., who forecasts that refined copper consumption will fall by 3.3% this year. Still, their views now erase earlier forecasts of a 4% rebound in 2008. Standard Bank analysts looks at poor residential construction figures as a key indicator of copper demand in the U.S., citing the fact that housing starts charted by the Commerce Department dropped by a faster-than-expected 14% in December to the lowest monthly level in more than 16 years. Another weak indicator for copper is that building permits also fell more than expected in December by 8% to 1.07 million units. For the year, permits were the sharpest seen in more than 25 years. From early 2006 levels, housing starts have declined by 56% and permits for new construction are down 52%. Still, overall, the world price of copper remains around or above $3/lb for what would be the third consecutive year. Edelson says "copper's price has recently been strengthening even in the face of the U.S. slowdown. That could be signaling that Asian economies, where much of the demand for copper is coming from, remain buoyant, steaming ahead."
Copper prices approach $4/lb as supplies tighten
Spot copper prices remain in the $3.70-$4.00 range as global stockpiles have dropped to the lowest level in six months, spurring speculation supply will trail demand for the year. “Copper looks the tightest market from a fundamental perspective,'' writes Barclays Bank analyst Kevin Norrish in London. Inventories may reach an all-time low and prices are sure to rise to an even higher record, he suggests.
A Thompson Financial report this morning says that sentiment towards nonferrous metals has swung since the start of this year. Most analysts had warned that base metals' prices were set for sharp falls as the credit crunch lingered, which meant players would sell off their holdings to raise cash and cover losses. But, in recent weeks, commodities have become tipped as useful assets. In the wake of the crisis, raw materials hold their value on a tight supply/demand balance, unlike equity markets which can crash completely. It is that perception that helped world copper hit its highest ever price of $4/lb on March 6 at the same time as gold and oil prices tested record highs.
Copper’s price has climbed for six consecutive years as production disruptions at mines from the Asia-Pacific region to Latin America have limited supply growth while demand from China, the world's largest user of the metal, and other developing nations has expanded. A weak dollar makes industrial metals cheaper for local currency holders and boosts the appeal of commodities. So, copper was up 27% in mid-March since the start of the year.
However, some other analysts suggest that copper prices may see some downward correction because the depressed U.S. economy will reduce near-future demand for the metal and China’s imports for the high-priced red metal may start declining. “Overall, we expect volatile trading in this short Easter week,” agrees analyst William Adams at BaseMetals.com. “Also, copper prices above $4 seem to be unattractive for Chinese investors,” adds an analysis by Karvy Comtrade in Mumbai, India.