What is new in the global product sourcing industry? The price of raw materials, particularly copper, has increased amid the pandemic. Here’s why:
One of the most widely used metals, copper has so many applications ranging from product manufacture, electricity, communication, and infrastructure. And the price of copper is steadily increasing since the last quarter of 2020. Is this good news? What are the implications for the promotional product industry?
A very useful commodity, copper is manufactured and sold as raw copper, ore, wire, and refined. As shown above, there was a steady increase from January 2021 which peaked on February 25.
The red metal has reportedly soared to up to over $9000 per metric tonne on the London Metal Exchange (LME) in February 2021, almost surpassing its record high of $10, 190 in February 2011. Despite the pandemic, the upward trend can be seen as a positive sign by many. So what causes the increase in the price of copper?
Global Product Sourcing: Raw Material Price Hike
3 Factors that Influence Copper Price Hike
1. China’s Economy is Recovering
One of the reasons for the copper price hike is China’s recovering economy. China is one of the top producers of copper in the world (producing 1.6 million metric tons in 2019 alone) and one of the top importers of copper ore as it needs to meet the demands of its manufacturing and infrastructure industries.
Aside from its recovering economy, the reduction in scrap collection as well as the government’s tighter regulations on allowing imports of copper scrap, are also expected to increase China’s imports this year.
2. Transition to Renewable Energy
With many companies pushing for greener, renewable sources of energy, the demand for metal such as copper is sure to soar higher than ever before. Copper is an important non-precious material used widely in the manufacture of electronics, EVs (Electric Vehicles), electric cables, and many more. Therefore, the slow but steady transition from fossil fuel dependency is expected to cause an increase in the demand for copper.
Supply and demand are also at play here. Disruptions in mining operations due to COVID-19 have also resulted in tighter supply. 2020 saw a drastic drop in production as mining companies, which were mostly located in South America, halted operation last year.
Peru and Chile are two of the largest producers of copper. However, these regions were hard-hit by the pandemic. According to reports, mine production in Peru went down by 16.5% year on year over January-September 2020.
Despite temporary shutdowns, global production of refined copper is estimated to have increased by 1.5% last year, which can be attributed to China’s renewed market appetite, where output soared by 2.4%.
There is a strong demand from countries like China but the key sources are not able to keep up, thereby driving up the price even more.
What Does This Mean for the Global Product Sourcing Industry?
- A higher demand, limited supply, and soaring prices could lead to buyers looking for alternatives to copper.
- Copper price hike coupled with the increased shipping fees could result in an increase in the price of manufacturing output.
Application of Copper in the Promotional Product Industry
One of the brands that had previous success in utilizing copper for promotional displays was Sipsmith London. Check out their unique Gin POS display here:
Why Is the Price of Magnet Increasing?
Copper is not the only raw material that saw a steady increase in price over the past few years. The price of rare earth elements such as Neodymium (Ne), along with dysprosium (Dy), praseodymium (Pr), and other elements used at fillers such as gadolinium (Gd), and cerium (Ce), the main components in the manufacture of Magnets have also soared this year.
This was triggered by environmental reforms, the demand from manufacturers of EV motors, and an imbalance in supply and demand.
How are magnets related to the current decarbonization programs of many countries? With more and more countries slowly walking away from fossil fuel dependency, the demand for more eco-friendly alternatives is ever increasing. For those not in the know, magnets are an essential component of Electronic Vehicles (EV).
According to Roskill (a think tank that specializes in critical materials supply chain intelligence) the demand for rare earth elements, underpinned by EV motor manufacture, will plummet by 7.5% per year until 2030.
Furthermore, by 2030, rare earth magnet applications are predicted to account for ~40% of the total demand, which could potentially increase “tight supply-demand balance for key magnetic rare earth elements, providing an opportunity for new production capacity to be financed, constructed and commissioned.”
Not only are magnets used in the manufacture of EV motors, but they are also used in wind turbines and other renewable energy transport and machinery.
China is one of the top producers and consumers of rare earth resources. However, their tight environmental reforms and strict supervision of mining companies have also influenced the price hike.
The country has recently drafted regulations that prohibit the sale of rare earth materials that can be potentially exploited illegally in an effort to stabilize the market and protect the environment and national security. The draft seeks to clarify the regulatory responsibilities, sustainability, and environment safety, quota management, and project approval. Magnets are used in the manufacture of electric vehicles, mobile phones, wind turbines, and industrial machinery.
In 2019 alone, China produced approximately 85% of the world’s rare oxides and almost 90% of rare earth metals, allows, and permanent magnets. With their exports decreasing over the years and the increased demand for such raw materials is driving the price up.
Application of Magnet in the Promotional Product Industry
Ever wondered how magnets are utilized by the promotional product industry? They can be used for the manufacture of POS displays, souvenirs, and so much more. Here is an example of how magnets are being utilized for the retail industry:
Promotional magnets: Here is another way of using magnets for the marketing and promotional products industry.
The price of stainless steel has also been increasing since the last quarter of 2020 and they are expected to remain especially on the first quarter of 2021. The prices for grade-304 stainless steel have also shot up by a whopping 15% as compared to its 5% increase last year. These were said to be triggered by increasing alloy surcharges and base prices. And this increase in surcharges is being passed onto the consumers.
But what is causing this increase?
The price hike can be attributed to high demand and limited supply, analysts say. This imbalance was also brought about by COVID 19 last year. Lockdowns have hampered steel production especially in steel-producing countries like China. Consumption also decreased. As a result, the supply was cut down as well.
Now that construction and manufacturing projects are back on track, the demand for steel is only going to soar higher.
What can businesses expect from this price hike? If you are in the construction industry, the increasing prices of steel will definitely result in additional expenses to finish a project. This also means that the prices of steel-based products could increase for consumers.
Application of Stainless Steel in the Promotional Product Industry
Stainless steel straws are considered an eco-friendly alternative to plastic ones. Furthermore, they are hygienic and easy to clean. With its non-corrosive properties, they are very durable and safe to use.
Steel is also a major material in the manufacture of cookware, dinnerware, and virtually any kitchen appliance you may think of. Its flexibility and malleability make it very easy to work with. You can make them any shape or size you want.
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