Bach Seat

Updated – 03-05-08 – Military tensions in South America are driving the costs of copper and oil up even more.

Last year, there was a large jump in copper telecom cable costs as manufacturers passed along raw material price increases in copper and petroleum. These price increases have affected all wire and cable products including plenum and non-plenum products; Cat 3, Cat 5e, Cat 6, Cat 6a, multi-pair cables, outside plant cables, and all low voltage electronic wire. Despite a market correction at the end of 2006, copper and petroleum prices used to manufacture cable are headed up again-meaning copper telecom cable will be following suit soon.

The fundamental cause for increasing copper telecom cables is the continuing global demand for copper and petroleum. China and Asia lead the demand for Copper. The U.S. demand is for copper is down due to the collapsing housing market, however, if the U.S. housing market ever takes off again, more demand pressure will drive copper prices higher.

China which is the world’s largest consumer of copper accounting for 20% of the world’s supply imported 61% more copper in March 2007 than in March of 2006. The U.S. consumes 13% of the world’s copper. Demand for copper has reduced the worldwide supply of available copper to less than four days of global use.

The upward pressure on copper telecom cables will follow technological globalization. The per capita demand for copper rises as GDP per capita rises. BaseMetals.com indicates that Japan consumes around 12kg per capita, North America consumers around 10kg per capita, and Europe around 9kg per capita. The large populations of China, India, Eastern Europe and South America are consuming less than 2kg per capita.

In addition to copper price pressure, the cost of oil also impacts telecom cable prices. George Bush’s war in Iraq and declining world oil production have led to price increases in gasoline and petrochemicals such as PVC resins and polyethylene which are derivatives of crude oil and used in the manufacture of telecom cables. Escalating crude oil prices have also increased transportation costs leading to increased freight charges and other transportation costs across the value chain.

The dual price pressures of copper and petroleum will continue to push up the cost of all cabling.

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• BT denies it is sitting on a ‘copper mine’ worth £50bn (telegraph.co.uk)

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.