Copper-based metals are popular, thanks to their many uses, but industry professionals must meet challenges head-on.
When it comes to doing business, overall the red metals industry is in the black. This is because the market for copper-based alloys is strong, with these metals in high demand.
Houston-based Aviva Metals is very busy, thanks to a thriving business with a growing inventory of the company’s traditional products, and now the addition of brass, bronze and copper rolled products. “Business has been pretty strong for us through 2021 and into 2022,” says Norman Lazarus, senior vice president. He expects the market to stay solid for at least the balance of this year.
David Goad agrees the red metals market is robust. He is vice president – IMD and Business Development at Cambridge-Lee Industries LLC, Reading, Pa. “We do not see any evidence of slowing demand and expect that some segments, particularly those using copper for electrical purposes, will remain strong for the foreseeable future,” he says.
Red metals’ bright future is based on electrification, occurring in data centers, charging stations, grid upgrades – and, of course, in electrical vehicle connectors and batteries. “All of that is a growth area for copper,” says Amy O’Shaughnessy, vice president sales and marketing, Revere Copper Products, Rome, N.Y. The mill’s customers on the copper bar side include electrical OEMs. “They’re going to be consumers of copper bar whether directly from Revere or indirectly through a service center,” she says.
Bob Farmer, co-president of Farmers Copper, Ltd., a distributor of copper-based materials, says, “Business is strong because of the expansion of the electrical grid and the electrical industry,” adding that copper is more widely used in EVs than in their gasoline-powered counterparts. “There are just a lot of components that go into the power-generation industry.”
Michael Russo, vice president of business development, National Bronze Manufacturing Co., Roseville, Mich., says the rise of EVs will be significant to his business, which serves the automotive industry, among others. “We do precision machine components, so not just our metal service center side, but on our machine component side; we’ll be here to serve that industry as well,” he says.
Outside of the copper bar arena, Revere Copper Products finds the metal is also a popular choice for architectural elements – such as roofing, gutters, downspouts and wall panels. And copper is sustainable and recyclable.
“Copper will last on a roof for 100 years, and when they take that roof down in 100 years, you can recycle the copper,” says O’Shaughnessy, adding that such sustainability will help keep red metals popular and widely used.
Despite the excellent health of the copper industry, companies in this field – as in any metals field – have their challenges. These businesses must also cope with labor shortages and supply chain disruptions. And the number of people who are retiring and quitting continues to be staggering, leaving attrition numbers quite high, especially for those in the skilled trades, according to O’Shaughnessy.
National Bronze Manufacturing has reacted to the labor shortage with automation. “We are looking at a tighter labor market and rising labor costs, so we’re trying to become more efficient,” says Russo. He notes the company wants to expand its machine capability and capacity. “You have to adapt to the times and what issues you’re dealing with, so during a labor shortage, you can increase labor efficiency with automation.”
Another challenge involves supply and demand. “The copper metals industry remains supply constrained. Demand is robust, lead times are longer and many manufacturers are at capacity and have customers on allocation,” says Goad, adding this is the case with many industries, and constraints are not only with manufacturers. “A tight labor market, particularly in the U.S., has contributed to an environment where many facets of the supply chain are disrupted. In logistics for example, this has led to longer, less predictable transit times and much higher cost. As providers it requires that we tightly manage all of the inputs associated with servicing the customer.”
Besides supply chain disruptions, global shipping costs are through the roof. However the material is arriving, the pricing of containers has gone up multiple folds over the last 12 months, says Lazarus.
Goad offers recommendations for those in the red metals industry to alleviate some of the supply chain challenges. He suggests copper consumers work closely with their supply chain partners and share specific information to better forecast demand so manufacturers can maximize production runs while distributors help to smooth the variation in requirements. He adds that a better understanding of who the providers are in the red metals industry would be helpful so industry professionals can have more robust supply options. He also acknowledges the industry has witnessed consolidations. Purchasers need to avoid panic buying or duplicate purchases to navigate the unique environment.
“The most important challenge for most of us in this business right now is to keep our customers supplied in a growing market. Thankfully, at Cambridge-Lee, we are well supported with our parent company manufacturing and strong, long-term, supply relationships that are enabling us to do that,” he says.
Lead times remain extended. “We are still seeing a very tight supply chain with some very long deliveries for the majority of products,” says Lazarus, adding that deliveries are still quite long and predicting supply chain restrictions will occur for the duration of the year.
Farmer agrees about the issue with lead times. “Delivery on products that used to take two weeks to six weeks is now around 22 weeks and beyond,” he says, pointing out that such long lead times apply to other metal product deliveries as well. And the shortage of containers adds to supply chain woes. “Shipping lines are busy trying to get product moved from across the world,” he says.
Russo has experienced the same. “Over the last year, I’ve noticed lead times have been stretched out much longer than they normally are, probably [due to] a combination of labor shortages and increased demand; it has put pressure on the supply chain,” he says.
High demand is the driver of the lead time issue. O’Shaughnessy says an initial uptick in demand occurred in June and July of 2020, and it has continued, growing at a pace than the producers have been able to keep up with. “We are not alone. This has been almost industry-wide.”
The company’s plan is to invest in capital projects to increase capacity and capabilities, as well as offer more manageable lead times. “Revere is finally in a position to look at capital projects that expand capacity and capabilities. Our industry has suffered from decades of neglect in terms of capital spend on equipment and infrastructure,” she says. “The entire supply chain needs to be healthy, and it’s the mills’ collective turn. The OEMs are healthy, the service centers are healthy; the mills need to be.”
She says copper and brass mills in the U.S. have not been able to spend cash on capital projects for the last two decades because of overcapacity in the global market, leading to depressed pricing. “When you have depressed pricing, you’re really doing what you can to keep your business alive,” she says. “You’re not able to do things that make you significantly more modern or better, bringing more to the table; you’re doing what you can to make sure employees are getting paid, the lights are on, and you’re getting product out the door.”
One project Revere Copper Products is planning is aimed at adding some additional copper casting capacity, and another project involves looking to expand the company’s footprint in the copper bar market. The business has been in the copper bar market for a long time, and it has been at maximum capacity. The business is looking forward to increasing its volumes and the types of sizes it produces. O’Shaughnessy estimates the projects to begin in early 2023.
Prices and Substitutions
Many in the industry believe copper prices will continue to rise due to high demand, especially through the first half of the year. “I think there are still opportunities for the price of copper to increase further, as we go into 2022,” says Lazarus. “I think there are possibilities of seeing an increase, not just for copper, but the whole metal complex. We will see it as well with nickel, tin and zinc.”
One concern National Bronze Manufacturing has is the effect of revenues if copper prices were to drastically drop. Russo says if the price of copper drops, so will the price of all his company’s items. “How would that affect revenue because we adjust our pricing based on where the market’s at? We’ve seen it go up probably in the last year or so, but the drastic drop – how would that affect the company overall? I think that’s one thing that we’re always worried about,” he says.
O’Shaughnessy finds the high price of COMEX copper challenging because “mills are essentially financing that – between the time you bring the metal into your plant and turn it around and ship it out the door, the customer pays for it. Mills don’t exist to be a bank; we exist to take raw material and turn it into a product that our customers can use. The higher copper goes, that becomes a challenge, and many mills need the customers to participate in the financing of that material because it’s so expensive.”
Because of the high copper prices, some industry professionals look for less expensive substitute materials. “There’s always a threat from substitutions by other materials; it never can be abated,” says Lazarus. Regarding the EV market, Aviva Metals is “definitely seeing a lot of inquiries and opportunities developing in that direction and for the future.”
This is not only true in the EV market, but in construction, as well. Goad says the threat of product substitution has been a factor for copper consumption in the construction market for years, “which underscores the importance of keeping this segment well supplied even while demand is increasing in others.”
Farmer concurs about copper substitution. “When prices get this high, for electrical use, aluminum can be a substitution, and then for corrosion resistance, nickel alloys and stainless alloys can be substituted in certain applications,” he says. Yet, he acknowledges that copper has superior conductivity and scrap value than aluminum.
Because high pricing may cause others to use substitutes for copper, improvements in copper alloys makes the red metal more attractive. Russo says advancements of the different engineered alloys create better parts and improving alloys by making them harder, stronger and able to wear longer just helps companies because there’s less replacement of the part. There are fewer breakdowns in machines.
“A copper nickel tin alloy or a nickel aluminum bronze are advancements in the different bronze alloys. They are stronger, they last longer, and they can be used in more demanding environments and applications, such as airplane landing gears and oil and gas, where they demand that kind of strength and resistance against corrosion,” he says.
Overall, red metals do perform well in many applications. And though companies try to develop metal alternatives to try to save money, it turns out that “the red metal is still the standard that they go with,” says Russo. Caption:
Electrification of all things has red metals riding high. (Photo courtesy Aviva Metals)