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Red Metal Report

Positively Charged

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MCN Editor Karen Zajac-Frazee Both the short- and long-term prognosis for copper, brass and bronze remain overwhelmingly optimistic. 

While the red metals market is faced with a few tailwinds at the dawn of 2024, that shouldn’t keep the supply chain from enjoying growth for the foreseeable future. 

Norm Lazarus, president of Aviva Metals, Houston, thinks it’s pretty positive and says the industry should anticipate a pretty good year, especially the first half. “I’m expecting a pretty good year. Obviously, my concern going into the second half of the year is going to be what happens with the elections as that’s going to have a lot of unknowns, especially at this point in time.”

He continues, “As you get to June and the summer months, everything can go upside down so we just have to cross that bridge basically when we get to it, but I’d say the first half of the year should be overall a pretty good year for us.”

Similarly, Michael Russo, vice president of sales and marketing, Wieland National Bronze, Roseville, Mich., says 2024 is also off to a good start. “We’re starting to see some real growth. The end of  2023 was kind of slow for us. We’ve seen a lot of customers, after the pandemic, after supply chain shortages, that really picked up their orders and they were burning through inventory in 2023. I’m very optimistic about what 2024 has to deliver.”

Tom McClenahan, vice president of sales and marketing for ABC Metals, a Logansport,  Ind.-based service center, says, “Like many, we saw up to a 10 to 15 percent decrease in market demand in 2023 depending upon the market segment. Some segments were flat year over year, some were slightly up but most of them are down in the 10 to 15 percent range.”

McClenahan says there’s some upside as interest rates and other drivers for many market segments will improve this year. Both residential and commercial construction should see a modest improvement, for example.  But he believes it will be hard to say how strongly that will manifest in overall North American demand for copper products. Therefore, he feels it is still prudent to take a slightly bearish view, and being a bit more conservative for 2024, with a more bullish outlook for 2025.

“We expect the electric vehicle market to continue to improve mid-term. They’re recently adjusting the demand for unit sales of EV vehicles downward in 2024. But even when we take that into account, we still see a moderate growth profile for EV demand over the next two years. Instead of demand being up 30 to 40 percent year over year as it was, we now see it flattening off in 2024.  But this still yields a single-digit growth projection year over year in a three-year forecast,” he says. 

That doesn’t mean some in the red metals supply chain are without worries. “One of the main concerns that we have for being a distributor in the red metals industry is all the consolidation. It’s almost becoming a monopoly, so the consolidation has been something that’s been a concern,” says Lance Shelton, COO of Christy Metals, Vernon Hills, Ill. 

Germany’s Wieland has been the chief architect of that consolidation, picking up companies such as National Bronze, Heyco Metals and Farmers Copper in 2023 and following it up with the acquisitions of Concast and Randall Bearings in January. 

Lazarus believes it is still very early and it’s hard to really get a read on how things shake out. The ultimate effect may not be known for four to five years. “By the same token, I always actually look at the bright side of life and it could be a good thing for the industry because they’re going to be investing and putting money into the USA.”

Revere Copper’s Amy O’Shaughnessy thinks it will be a positive. “Wieland’s a great company that has really good leadership that is trying to be No. 1 in the industry. That’s not unlike our goal so I certainly  can understand and support that. I think the magnitude of how much they’ve acquired these last few years and obviously the recent investment they announced with the $500 million dollar investment I don’t think the industry has seen anything like this. We haven’t fully felt the outcomes of that. That’s yet to come and we’ll kind of see how all that plays out over time.”

McClenahan says the growing list of acquisitions by the industry leader Wieland Metals is indicative of its global strategies.  “As far as concerns, the market will respond as the market always does. It will seek a way to collaborate and leverage with the industry leaders such as Wieland, and other leading companies who work alongside and with Wieland Metals.”

If a situation develops where there is a lack of open competition or restricted market access in the USA, then the consumers and supply chain, will always react. “Regional markets will always move to maintain some balance, and push back as needed, while the largest producers such as Wieland constantly look to create advantages in the global landscape for themselves. It will be interesting to see when the tipping point is reached. Wieland is an important leader in our industry… but they are only one of several.  I think it’s important to remember that perspective, and how regulated markets naturally choose winners and losers over time,” he adds. 

Another key driver over the longer term is the place of manufacturing in the U.S. economy.  O’Shaughnessy, vice president of sales and marketing for Rome, N.Y.-based Revere hopes the positive momentum continues for American manufacturing that began with the election of former President Donald Trump. “This is when it started and it has continued. Protecting American manufacturing should be our country’s top priority and too many times we as a country take on this globalist view and this can end up hurting American manufacturing and the health of our country.” 

O’Shaughnessy continues, “Everything that’s happening in this electrification space everybody wants a piece of it and that includes other countries. They want a piece of it in their own country and they want America’s piece because America is the biggest market. I think we need to be very smart and very careful about the implications of that.”

One issue facing the supply chain is the ability to maintain costs, whether that’s rising wages or for raw materials. “All the costs are constantly rising and that’s not just including the metals cost, just inflationary things and labor cost and energy. It’s a real battle sometimes, so kind of that is the primary concern,” Russo says. 

Shelton says pricing seems to be up a little bit from the mills the last two years. “They’ve got a lot of capital investments, a lot of improvements put in and so they obviously had to raise prices and everybody wants to make more money each year. Everything went up after COVID. We’ve increased our pricing based on what the mills have increased to us.”

McClenahan thinks the copper mills are experiencing tremendous pricing power in spite of some softness in the economy. “There’s a generally perceived lack of capacity and the copper mills are still rationalizing that capacity by market segment and the mills are still allocating capacities by customer and product line.  This means that they’re able to take price increases to the market pretty aggressively. So for them, the main question is how they can take advantage of copper’s price elasticity in the market right now. They are definitely doing all they can to pass that on to end customers. 

“We have had some success in the distribution channel, in spite of the challenges being a mid-tier supply chain partner between the mills and the customers.  We have been forced to pass these increases along, but unfortunately we are not able to push all of the mill increases through in some market channels. Some customers still perceive they have viable solutions using lower cost import products on a landed basis, but they do so at the expense of lead time and serviceability. So we’re really looking for customers to continue to work with us regionally, knowing how important net U.S. consumption is for the economic viability of the U.S. copper industry. In the big picture, probably 75 percent of our customers are accepting increases this year and passing them through,” McClenahan adds.

Russo adds that traditionally pricing was based on the price of the raw material.  “We deal with bronze so it’s such a niche market in the copper so the bronze pricing really is influenced by the price of copper. Generally, it’s about 80 percent copper and bronze and historically we’ve seen as the copper price rises, so does the bronze price. Now, we’re seeing other inflationary factors that don’t necessarily trend with the copper price. So it’s really understanding where we have the same rising cost not just of the metal itself and then also explaining to our customers that it doesn’t track exactly along with the copper price.”

“We have all these other factors. It’s something that would have to do but I think pricing still is fair considering the overall inflation levels, but I guess we’ll see in the years to come how that changes,” Russo says.

Most executives were in agreement with the long-term copper outlook. 

O’Shaughnessy feels there will be a lot of strength behind demand for copper in the next decade or so. “The demand curve won’t be a straight arrow upward. I think it’s going to have some ups and downs but the trajectory feels positive. That’s what all the data we have is telling us. If the data changes, we’ll see...”

Shelton agrees  that the long-term outlook for copper is nothing but upside. “There’s copper in everything we use. I mean everyone knows that.”

“I think long term, copper is going to be strong. I think we’re at a point where it’s necessary to use copper. Years ago probably would have been different and when the price of copper went up, people would use substitute materials so they can get away with using a composite plastic or something like that,” Russo states. “I think at this point it’s been engineered so much that what’s left has to remain copper, so I think the demand is still going to be strong.

“There is supply out there. It’s just about getting it out of the ground, getting it processed through into the supply chain, into the stream so I don’t think that there’s going to be a huge shortage. We’ll probably see spikes here and there but, all in all, it will level off and if not we still have a good demand for it in the industry,” Russo adds. 

Lazarus says the EV market is going to have some effect on the demand for copper. “Is it going to be as great as everyone had anticipated? No. I think the demand is not really going to be there, especially if you take a look at the global basis. Is the demand in the USA and maybe Germany or certain parts of Europe going to be stronger over the next few years? Possibly. So what percentage of people are going to buy EV’s? I don’t know if it’s going to be 20 percent.”

Russo says that while we’re going to see spikes, the predictions seem to change often on what the EV market is going to be in 2030 and how many are going to be purchased and used. “With some of the earlier predictions that we looked at, clearly the supply won’t be there – we don’t have enough. But from speaking to different mining companies and areas like that they’re ready to deliver. We may see some copper spikes here and there. I do think it’ll level off. We’ll see what the future has to bring as far as EV goes,” Russo adds.

O’Shaughnessy says the largest area of growth is related to the electric vehicle, whether it’s the vehicle itself or charging stations or the need to upgrade the grid to support the charging stations. “All that work is going to require copper in some form or another and I mean that is significant because that’s the largest growth area for sure.”

However, what will be the effect of electrification from appliances to phones, which are growing increasingly “smarter?” All of that data needs to be stored. “It’s stored in data centers. Data centers need to be powered. That’s where copper comes into play for us. As those sorts of appliances and devices become smarter and rely on data and AI, you’re going to require more storage and that’s where we’ll come into play, making sure there’s uninterrupted power supply with our products and what our customers make,” she says.

“The overall demand of copper products is increasing, but I see the electrification of the appliances and similar consumer products having a small, nominal impact on copper market demand.  These products are simply a part of the overall initiative for green technologies that use less carbon-emitting products,” McClenahan states.

“I think when the industry demand for these consumer products is rolled together with green technology, including the EV and power grid infrastructure upgrades, we will see that power infrastructure volumes will far outweigh the small, but valuable increases in copper from appliance and consumer device growth. 

“Copper consumption from expansion of power generation, transmission grids and localized smart meter devices will drive the largest growth in copper demand over the next 10 years, not the consumer appliances themselves,” McClenahan adds.

With the increase of copper use, there are various concerns on the raw material side. Russo says that currently it’s not a huge problem. 

“Now as far as you’re just talking pure copper, the models that they have we won’t have enough supply at our current levels but we’re already building our infrastructure there to be able to support this.” 

Russo continues, “On the bronze side, it’s such a niche market where we haven’t seen anything, but right now we’re kind of experiencing a shortage in bronze powdered metal which is affecting the industry. Again our industry is so niche where if one supplier has a disruption, it can affect the whole industry, but I think in the end, it will work itself out.” 

From a macro standpoint, Shelton thinks there’s enough supply right now. “In 10 years and in 20 years, I think, it depends on the EV market a little bit as far as the growth, but right now there’s definitely enough supply.”

“Global mining and refining is transient.  We see investment continue in the traditional mining and treatment operations, but moreover, we see the rising copper commodity prices creating viable opportunities in the secondary, alternate copper methods.  There are some really interesting alternate mining and refining technologies developing that are becoming viable with $4-per-pound copper and recent technology advancements,” McClenahan contributes.

Yet, is the North American production market well positioned to handle the demand levels in the  upcoming years? Near term, McClenahan states that there seems to be enough domestic supply, especially with key expansions recently in the bus bar, rolled flat and conform wire production operations here. 

However, longer term, McClenahan states that the question of capacity vs. demand is less clear. The primary copper mills and producers will make the investments needed to keep pace, although it could be lagging the true demand slightly. The key concern long term is the unevenness of the rapidly developing e-Mobility and power infrastructure markets in the U.S.

“I would be more concerned for the future of the copper industry and U.S. manufacturing if we did not see these investment decisions happening in the USA. And for now, I think it is important that OEMs and Tier 1 manufacturers in the United States pay close attention to who is making these investments for our collective future, and align themselves accordingly. The future is bright,” McClenahan states.

“We’re continuing to add capacity slitting equipment and tinning equipment so that we can sustain the future,” Shelton says.

Aviva Metals produces oxygen-free bar products, among its other offerings. (Photo courtesy Aviva Metals)