|Title:||United States copper and brass wholesalers' shipments by product format and type in pounds and percent change for 2010 and 2011|
|Source:||Metal Center News|
Start of full article - but without data
Service Center Copper & Brass Shipments
Change 2010-2011 Shipments in Thousands of Pounds
2010 2011 %Change
Copper Sheet XX,XXX XX,XXX +X.X% Copper Plate X,XXX X X,XXX +XX.X% Copper Rod XX,XXX X XX,XXX +XX.X% Copper Pipe X,XXX X,XXX +XX.X%
Total Copper XXX,XXX XXX,XXX +XX.X%
XXX Series Brass Sheet XX,XXX XX,XXX -XX.X% Other Alloy Sheet XX,XXX XX,XXX X.X% XXX Series Brass Plate XXX X,XXX +XX.X% All Other Alloy Plate X,XXX X,XXX -X.X% XXX Series Rod & Bar XX,XXX XX,XXX +X.X% Other Rod and Bar X,XXX XX,XXX +XX.X% Alloy Pipe X,XXX X,XXX +XX.X%
Total Alloy XXX,XXX XXX,XXX -X.X% Total Warehouse XXX,XXX XXX,XXX +X.X%
Source: Copper & Brass Servicenter Association
Total service center shipments of copper and brass products increased
by nearly X percent last year, even though alloy shipments actually
declined by about X percent.
North America's red metals supply chain, has had a bumpy ride since the recession hit in late 2008. But now that the down-turn is fading from the industry's rearview mirror, the road ahead looks retatively trouble free. Producers and distributdrs of copper and brass products contacted by Metal Center News were consistent in their positive assessment of the current market. Companies generally experienced a solidly profitable year in 2011 and expect even better results in XGXX.
"Everything's going well. Everyone's busy and paying their bills on time. The long lead times have an effect, but I can't think of anything that's keeping me up at night," says Dick Farmer co-president of Farmer's Copper Ltd., Galveston, Texas.
"The economy is improving in general. There's potential for some good growth in business over the next couple of years. There's a greater sense of optimism these days." says Al Barbour, president and CEO of Concast Metal Products, Mars, Pa.
Even possible impediments such as Europe's precarious financial position or the volatility of copper pricing are not generating overwhelming concern. "We've been through it before, so you can't be naive. But everything seems to be trending up just about everywhere," says Fran Kevane, president and CEO of Copper and Brass Sales, Southfield, Mich.
Among the major end markets, the most encouraging for copper and brass suppliers has been the automotive sector. Vehicle production rose to about XX million units in 2011, and is forecast to climb close to XX million this year, from lows of less than nine million during the depths of the recession.
"Automotive is indirect for us, but it's been good and continues to improve," says Kevane.
Perhaps more significant than the upturn in the auto build cycle is the growing role copper is playing in vehicle designs. The shift toward more fuel-efficient cars and trucks plays to copper's strengths, particularly the increasing use of electricity as a primary or alternate source of power.
According to the New York-based Copper Development Association, the average gasoline-fueled car produced in North America contains XX to XX pounds of copper. In a hybrid vehicle, the use of copper doubles. And in a pure electric vehicle, the poundage triples.
Bob Weed, CDA vice president, notes that copper is a key resource for both the components in the electric car and the infrastructure required to keep those cars juiced. While electric vehicles haven't found widespread appeal yet because of their high cost, and charging stations are few and far between, any uptick in their use is good for both copper and the environment.
"Even if EVs are only a small percentage of the market so far, there are now fewer cars burning gasoline and releasing tailpipe emissions," Weed says. 'The copper industry is pleased to be an important part of the energy technology."
In addition to changes in the power train, cars now routinely include such smart features as GPS systems, hands-free cell phone links and even Internet connectivity. Such enhancements put greater demands on the electrical systems than in the past, notes Dan Kendall, president of ABC Metals. Logansport, Ind.
All of that adds up to a strong market for copper suppliers. "The automotive business has certainly been the bright spot for us in 2011, and we look for it to be the same in 2012," says Tom Werner, vice president of marketing and sales for Olin Brass, a Louisville, Ky.-based manufacturer of copper alloy sheet and strip.
In addition to automotive, other markets for red metals have performed well in the past year. Distributors point out strength in general manufacturing, power generation and consumer electronics.
"We don't see many markets that are down right now," says Garret Her-ringdon, general manager of Southern Copper & Supply Co., Pelham, Ala. "The forecast from all of our manufacturing customers is giving us the feeling of a strong 2012."
National Bronze & Metals Inc.'s new foundry in Lorain, Ohio, has increased NBM's ability to serve the aerospace market. "It's more high-end materials we're looking at now, the nickel-aluminum bronzes and temper-quenched types of materials," says Norm Lazarus, senior vice president for the Houston-based manufacturer and master distributor.
The company's strength in aerospace will further expand with the recent qualification of NBM's material for use by leading landing gear manufacturer Messier-Bugatti-Dowty. He expects orders from other domestic and foreign aerospace customers to follow. "Once you have their approval, all their Tier Is and Tier Xs can access our material," Lazarus says.
One market that continues to disappoint red metals suppliers is construction, both residential and nonresidential. Consumption of building materials such as plumbing products and wiring remain dismal, say the experts. On top of that, copper has lost considerable market share in the roofing industry, where it was gaining popularity as a design element in high-end homes and commercial properties.
"There has been demand destruction in the roofing industry. While the current drop will solidify, not deepen, it would be foolish to think there's going to be a return to previous levels," says Kendall at ABC Metals.
On the other hand, he notes, it's in the housing industry where some of the greatest opportunities exist. When residential construction finally takes off again, he expects to see a step forward in the use of technology, not unlike the trend in automotive. "I think you'll see more application of smart technologies in the housing arena," Kendall says.
While demand is promising, copper's volatile price swings remain an issue, especially for stocking distributors who continually see the value of their inventories rise and fall. In some ways, the unpredictability has itself become predictable. "We're accustomed to it now. It's just the way it is," says Farmer. Of course, knowing it's coming doesn't necessarily make it easier, 'it's kind of like living in Florida. Do you ever get used to the hurricanes?" Kendall asks.
On the positive side, prices have shifted within a narrower range over the past few years, say executives. From mid-2008 to mid-2009, the Comex price varied from a low of $ X.XX per pound to a high of $X.XX, a range of about SX.XX. From February 2011 through February 2012, the range from peak to trough was only $X.XX, about half the magnitude. As of mid-February, copper was trading around $X.XX a pound. "It's closer but choppier," says Kevane at Copper and Brass Sales. "It's just a different set of challenges we have to deal with."
The primary method service centers and others in the supply chain use to deal with the volatility is to reduce inventory levels. Having less material on the floor and turning it more rapidly is the easiest way to mitigate the price risk.
"The service centers are still hand-to-mouth, not wanting to expose themselves," says Lazarus. "As the price of copper gets close to the $X mark, they're more and more reluctant to build inventories, except for special alloys."
Of course, it's not just a simple matter of reducing stocks to bare bones levels, which can result in lost sales. "We look for higher turns than we had in the past, but you have to have the metal there for the customers," says Kevane. "You don't do that just by having a lot less stuff--you have to be more surgical in your management."
One management tool some service centers use to mitigate the risk is hedging on the futures market. But it's still not widespread, Kendall says, and that's one reason the volatility remains his biggest concern. That others may be incurring more risk, whether they're customers or competitors, is not encouraging. "If you're driving a four-wheel drive in the snow, you've got every bit of confidence you're going to be fine. It's the other idiot on the road that makes it a dangerous place," he says. "On the copper road, we have significant traction to weather the volatility storm, but I'm concerned about everybody else that's on the road with us."
By mid-February, copper's price had climbed XX cents a pound since the start of the year. Analyst Edward Meir of INTL FCStone, in his Monthly Commodity Overview, cited strong import data out of China and more robust macroeconomic data out of the United States for the surge.
However, Meir notes, while Chinese imports rose, they were matched by a growth in Chinese inventories. "This tells us that not all the imported metal is being consumed and that the recent intake is either on account of arbitrage or, more likely, has been brought in as collateral to circumvent tight banking regulations. Either way, this is not a backdrop that bodes well for higher prices down the road," he says.
If copper's price gets too high, it could trigger substitution by other materials, such as PVC plumbing products, though that is unlikely, says Kevane. "If copper were to approach $X per pound, which is possible, [substitution] may become much more of a factor."
"Copper is reasonably mature, with a strong intrinsic value it brings to its products. Much of the substitution that will occur has already occurred," adds Werner at Olin Brass.
The copper and brass supply chain has experienced major consolidation over the past two decades as mill after mill has reorganized or closed its doors. The latest such announcement came in September when Hussey Copper, Leetsdale, Pa., filed for Chapter XX bankruptcy protection. In December, Patriarch Partners, a New York-based private equity firm that specializes in manufacturing turnarounds, acquired Hussey's assets. Patriarch Partners has installed a new management team at Hussey, led by CEO Joe Mallak, who could not be reached for comment. How the new Hussey unfolds is a question that piques the curiosity of the distribution market.
Some distributors are confident the new ownership team will invest the money to get Hussey turned around. But others are taking a wait-and-see approach, as signs of major change haven't been apparent.
Another recent announcement of note to copper distributors came in November, when the Metals Service Center Institute unveiled plans to start a copper and brass specialty division. Which begs the question: Does the industry need two trade groups?
Kendall believes that regardless of what happens with MSCI's red metals division, CBSA will continue to have a leadership role in the copper supply chain. "It's an organization that, from its inception, has been founded on the distribution of copper. That's what we promote, that's our expertise. If you distribute copper, you need to be a member of the Copper and Brass Servicenter Association," says Kendall, who currently serves as CBSA's president.
Service Center Copper & Brass Shipments
Change 2010-2011 Shipments in Thousands of Pounds