07 July 2005 | Anusha Bradley
Metal buyers are suffering massive price increases caused by low stock levels and compounded by insatiable demand from China.
Prices on the London Metal Exchange have risen continuously, with copper reaching £2,000/tonne in June.
It is the first time copper prices have topped £2,000 since April 2004 - which at the time broke a nine-year record. In addition, copper stocks have fallen to their lowest level in 30 years.
According to Barclays Capital, copper prices could continue to surge for now because of the lack of availability. In a recent research report, analyst Ingrid Sterby said copper stocks were 80 per cent lower than last year.
China uses about 3.8 megatonnes of copper a year, she said, but its exchange only holds 20 kilotonnes and its stocks are largely depleted.
"Future requirements remain large and availability is clearly insufficient," she said.
She added that customers will need to start stockpiling copper to avoid "the shortcomings of just-in-time inventory".
Peter Constantopoulos, managing director of Marflex Krempel, a cable and insulation material manufacturer, said copper prices had gone up by 35 per cent in the past five weeks.
"That's a big increase in that timeframe," he said.
In the previous 18 months, the price was below £1,000.
He added that the cost of all metals, including tin, nickel and aluminium, has been rising.
However, Constantopoulos forecast that prices might drop when new copper mines in Chile begin production.
David Hall, purchasing manager at engineering component manufacturer Washington Components, agreed that prices have steadily increased in the past year.
Buyers were also hit by nickel surcharges tacked on to prices of materials containing the expensive metal, he added.
"Often when I do a quote in advance, by the time the order comes the price of materials has gone up," Hall said. He added that he had no choice but to pass cost increases on to customers.