 In spite of a recent period of calm, the price of copper has remained on a strongly upward trend since September 2003, a year which saw the price rise by 49%. At the start of this year, it reached its highest level for 15 years, equivalent to an increase of 120% in relation to its low point in November 2001. The analysts, on the whole, are unanimous about the reasons for this lasting increase:
- resumption of economic growth
- strong demand from Asia and China
- limited growth in production capacity
- strikes, mining accidents
Everything is easy to explain with hindsight. Making a serious forecast of movements in the price of copper over the rest of the year and beyond is quite another story, on the other hand.
There is a shortfall of 500,000 tonnes, or 7.5%, in the supply of copper on a global scale at the present time.
Does the current price of copper already fully incorporate this element of shortage? Does it take too much account of the shortage for speculative reasons? To what extent does this price make allowance for the recommissioning of unexploited mines, including this year? Does it take account, and if yes, by how much, of social problems and unexpected mining difficulties? Is there a risk of a lasting shortage?
In this relatively volatile situation, the economists remain cautious and find magical formulations with which to express their forecasts, such as, "We believe that we can affirm with relative certainty that…"!
As a manufacturer of energy and telecommunication cables who incorporate very large quantities of copper into our products (on average 40%), we are not permitted to engage in speculation of any kind in respect of movements in the price of copper. Moreover, we have never done this. It is an essential element of our prices, which must be determined, or must be capable of being determined, at the time of making offers or accepting orders.
In spite of the considerable volatility in the current market, it is best to remain calm and to engage in meticulous research with our customers to identify the best solutions to maintain control over costs linked to these fluctuations. The sooner we are integrated into their projects, the better we will be able to come up with effective solutions and to offer them useful advice.
Whatever the outcome, our advice will never encourage speculation on rises or falls in the market.
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