Impact of Raw Material Price On The Cable and Wire Industry
The global economy is seeing some positive indicators for growth, with constant high demand. However, market optimism is challenged by unpredictable supply, logistics and production bottlenecks, fuel prices spiking, and labor shortages. While solution providers work hard to keep the pace with demand, the mentioned challenges have put restrictions on operational efficiency and margins as many organizations announce price increases to control impacts of rising costs.
The increasing use of copper in the emerging markets has put supply under considerable strain. It is thought that more that 95% of all copper ever mined and smelted has been extracted since 1900. This demand continues, with demand for copper currently increasing by 575,000 tons annually and increasing.
Rising prices are a part of life but can pose potential issues for the entire supply chain from start to finish.
Prices of raw materials have kept their upward momentum that began in the second quarter of last year. The price of copper is largely influenced by the health of the global economy. This is due to its widespread applications in all sectors of the economy, such as power generation and transmission, construction, factory equipment and electronics as well as cables. Copper is a great electricity conductor, cheaper compared to other electrical materials, and has a wide variety of applications. The reddish-brown metal is in everything from consumer electronics and car parts to cabling. It’s also a finite resource, which means supply will eventually decline due to increased application and demand.
If crude oil prices rise over time, it impacts everything from the cost to extract and deliver raw materials to manufacturers to value-add pieces like PVC and polyethylene jackets found on UL-rated copper wiring. Once the wire is shipped, distributors must pay more for the final products on top of higher shipping costs. Finally, distributors pass the added expenses on to contractors, electrical companies, and others who need wire to complete projects.
China is known to be the world’s leading electronics manufacturer and the largest copper consumer, and as more focus is put on the green revolution, including the rise of solar power and electric vehicles, the need for copper will likely grow.
Ultimately the cable business and specially the copper cables are directly affected by the copper price and supply. The higher copper prices are, the greater it would cost the final consumer and more challenging it would be for new projects to commence particularly the renewable ones. As copper is defined as an essential pillar in building these projects.
The obstacles are not just in the high price of copper currently, but it has more do to with the extreme high global demand in copper and somewhat shortages in supplying them has increased the progress of building more green projects.