Why Are Prices Skyrocketing in Wire & Cable Products?

Author: Kassie Teagarden, Senior Content Marketing Specialist, LAPP Tannehill

If you’re paying attention to the wire and cable industry, then you’ve probably already noticed price increases in copper, silver, and other raw materials.

We make a diligent effort at LAPP Tannehill to make sure our customers know about all the economic impacts, environmental factors, and industry trends that can potentially affect the way you do business.

Read more recent copper updates in 'How Copper Plays a Role in Future Sustainability' and 'Relentless Copper Prices Continue to Rise'. If you have any further questions about copper products or prices, feel free to contact us.

Why Cost Increases for Copper, Silver, and Raw Materials are Leading to Higher Prices

Whether these price fluctuations are affecting the wire, cable, and connectivity products and materials you’re currently purchasing or they’re affecting your outlook on budget projections in procurement, finance, supply chain management, or product development – we’ve got you covered.

Let’s take a look at some of the world-wide cost pressures that are affecting manufacturers, distributors, and suppliers who are in need of wire and cable products.

Copper

After a 22% price increase in 2020, Goldman Sachs analysts say that 2021 could soon see a record high for copper prices. These price increases are due to factors such as China’s economic recovery from the pandemic, sustainable green energy stimuluses, and supply disruptions.

China’s rising industrial production along with aggressive sustainable energy initiatives accredits the country to being the highest consumer of copper in the world.

Europe, the U.S., and China all have strenuous renewable energy initiatives to sustain greener economies and a need for copper’s highly thermal and electric conductivity to help them get there.

The biggest copper producing countries such as Chile, Peru, China, and the U.S. struggle to meet the high demand for countries to meet their green economy initiatives, therefore playing a role in sky-rocketing the price of copper.

 What's the difference between COMEX vs Omega-Camden Copper Prices?

There is also speculation that as the U.S. dollar is increasingly becoming weaker against other global currencies, there are more opportunities for users of other currencies to have more buying power with copper and other commodities.

Chile, the world’s leading exporter of copper, has had a hard time keeping up with demand due to surge in miners falling ill to the coronavirus and their companies facing labor union strikes.

The following graph shows a trend in the last 6 months (August 2020 through February 2021) of copper prices steadily, yet rapidly, rising. Check out the interactive COMEX Copper Prices Chart for more historical trends.

Graph indicating upwards tick in copper pricing from August 2020 – February 2021

Stifel Financial analysts say, "Of all the metals used in the generation, transmission, storage, and consumption, copper remains the common denominator. Electricity generation, transmission infrastructure, energy storage, and consumption all require copper."

According to the European Copper Institute, world-wide copper consumption is predicted to rise more than 40% by 2035.

Silver

While the majority of industrial wire and cable is comprised of copper conductors, silver is commonly used to plate copper conductors in higher temperature applications.

Although silver has better conductivity compared to copper and aluminum, the metal has always been more expensive.

Goldman Sachs analysts are reiterating their predictions and forecasts of silver prices increasing (up to $33 an ounce) due to recent U.S. plans to move forward with increasing alternative renewable energy production in solar power and 5G technology.

Top silver producing countries such as Mexico and Peru are still recovering from pandemic lockdowns being implemented at major mining companies which cause temporary halts in production.

Read more about how silver prices have impacted PTFE wire products.

Non-Metal Raw Materials & Other Costs

Additional important non-metal raw materials for wire and cable production such as critical resins and polymer chemical compounds (found in insulation and jacketing of wire and cable) are also increasing in price.

Recently, one of the largest North American based wire and cable manufacturers indicated that their insulating and jacketing materials have recently increased in cost by between 10-25% depending on the compound and will be implementing broad-based price increases in the Spring of 2021.

Many manufacturers have announced an increase in costs for packaging material commonly found in wire and cable packaging, primarily those based on wood, with increases of between 5-10% on materials such as plywood, wooden reels, and cardboard packaging materials.

Freight, logistics, and transportation costs have also increased throughout the market as the global economy recovers from the pandemic.

How LAPP Tannehill is Committed to Helping You Save Money

We are diligently working with all of our manufacturers to offset these increases through optimizing our internal processes and manufacturing productivity.

From a long-term perspective, no manufacturers or distributors can accurately predict the movements commodity prices or other costs factors but rest assured LAPP Tannehill is in continuous contact with the industry's leading manufacturers to mitigate the impacts of this and all supply chain and raw material events in the market.

 Check out these 4 Steps to Save on Wire and Cable Material Costs.

Brian Arickx, LAPP Tannehill’s Supply Chain Manager, states, "As always, the purchasing team at LAPP Tannehill is doing everything in their power to buy all products at the best possible cost for our customers. We are actively analyzing quantity breaks, copper trends and multiple manufacture options. One luxury of distribution is we have the oversight of 250 manufacturing partners, allowing us to see trends and easily compare cost options across the industry."

Our wire and cable alternatives are both cost efficient and reliable, and may save you money in the long run. Your sales rep will be able to recommend the most appropriate equal for you.

We recommend that all of our customers include the expected cost volatility and increases into their short and long-term materials planning and procurement activities.

Contact your sales representative to help identify product alternatives and options which may help offset these industry-wide price increases.

Contact us with questions or inquiries.

This is the second mine from Escondida, Escondida Norte, The copper production of Escondida is the ... [+] biggest in the world. (Photo by Oliver Llaneza Hesse/Construction Photography/Avalon/Getty Images)

Copper is the wiring connecting the present and future. It is also the global markets’ latest runaway. The growing supply-demand gap for copper is increasing volatility in markets to the point that buyers are seeking to secure long-term deals due to increased concerns about its availability. Copper prices have surged since they hit a low point in March 2020 as COVID hit. Low copper prices (58% decline from 2010 to 2016) helped spur and sustain investments and research in renewables, but they also reduced incentives for many copper manufacturers, including Broken Hill Proprietary, Freeport-McMoran, Glencore, and Southern Copper, to increase production levels. High copper prices could constrain electrification, including for transport, and emerging technologies, such as renewables.

If this was any other commodity there would be no mystery. A pandemic-induced demand slump resulted in an underinvestment in production, so when demand rebounded producers were ill-equipped to handle new orders, resulting in higher prices. For copper, it’s not so simple.

There are two problems. Firstly, there has been increased investment in research and development of creating synthetic alternatives for copper which should help stabilize prices even if the power conversion efficiency of synthetic copper is still less than desired. Secondly, copper production is comparatively easy to ramp up and has already done so, with little impact on prices. The real reason copper is shooting up in price can be distilled down to one key point: copper is directly linked with energy infrastructure and future energy developments.

An employee monitors the 8mm diameter copper cable which is rolled up before passing through a ... [+] rolling mill to become cable at the Nexans manufacture in Lens, northern France, on May 11, 2022. - The French cable company is the only one in its sector to have its own copper foundry in Lens. This plant represents a competitive advantage for Nexans at the dawn of an explosion in demand for electrical cables. (Photo by Denis Charlet / AFP) (Photo by DENIS CHARLET/AFP via Getty Images)

As we should know from high school physics and chemistry, copper is an incredibly efficient conductor of electricity and heat, making it vital for nearly every piece of infrastructure or electrical device from cables to generators to electric engines. It is used across industries in everything from cars to aircraft to computers. This unmatched utility has helped increase supply and demand. Over the past 30 years, copper production increased by 124%. Yet, this is less than half of the value of production increases of competing commodities aluminum and iron, totaling 256% and 257% respectively.

Rising energy costs have hit the energy-intensive copper mining and refining industries hard. Increasing crude oil and natural gas prices have increased copper’s cost of production. Further complicating matters, the very same increasing energy costs are leading to an increase in the demand for copper as alternative energy technologies including wind, solar and electric vehicles are becoming more prominent. This increase in the demand cycle is further magnified by foreign competition from emerging markets, both for building energy infrastructure, increased consumer spending for cars, planes, and gadgets, and the growth in the production of all things electric.

A key player in the copper market driving up demand is China. It consumes 40-50% of newly mined copper annually, even when supply increases, and is the home of copper giants like Jiangxi Copper and the Zijin Mining Group which are active across the world. China’s economic growth, especially its post-pandemic rebound, correlates with current copper prices measured via the “Li Keqiang Index”. Industrial metals such as aluminum and copper generally tend to show the strongest correlations with the Li Keqiang Index which measures growth in the Chinese economy. With increased market demand in China post-pandemic as observed in the Index, copper prices have moved in a similar direction.

NANJING, CHINA - JANUARY 18: An employee produces copper wires at Nanjing Gree Electric Enterprise ... [+] Co., Ltd. on January 18, 2021 in Nanjing, Jiangsu Province of China. (Photo by Fang Dongxu/VCG via Getty Images)

China is consuming copper at quantities and prices higher than normal market conditions would dictate because China sees copper consumption and investment in energy infrastructure as a political project and another aspect of Sino-American rivalry. It is determined to become the indispensable actor in every facet of the international energy supply chain, and copper is just another arena this is playing out in.

Increasing copper prices are a key sign of the viability and progress of decarbonization, electric vehicle production, and so much more. After the woes of inflation and pandemic-era logistical bottlenecks are fully shaken off, copper prices could see a decrease in volatility and a return to more stable levels. But make no mistake, the era of naturally cheap copper is over unless steps are taken to systematically increase supply – or cheap and viable substitutes are found. As copper demand is expected to double by 2030, the industry hopes for corporate planning to concurrently increase supply. Environmental overregulation in the developed world will allow China to increase its leadership in copper production.

Copper has been mined and utilized by humans since the Bronze Age, and its recent woes should remind us that even high-tech post-industrial societies require stable primary product inputs which are interconnected in ways we seldom consider. The Biden administration and the EU should make every effort to increase domestic and friend-shored production of copper to ensure stable and low prices. If environmentalists oppose copper mining in the US and the West, they are embracing a self-defeating strategy that will not only hand China the tools required to dictate humanity’s further electrification and decarbonization strategies but also slow and damage the adoption of green technologies everywhere. Embracing responsible copper production is a small price to pay for electrification and decarbonization.