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Published on 8/2/2006

AWC eUpdate Newsletter August 2006

Are Copper Prices on the Rise Again?

Copper Prices have been higher than ever in 2006. In April we saw an increase from $2.45 per pound to $2.71 per pound in one week alone. On May 15, Copper hit a record high at $4.10. Since then, prices have leveled out slightly, and as of August 15, Camden's base copper price was $3.80. With high demand and unionized strikes, prices might be headed back up shortly.

Currently, the world's largest copper mine, Escondida, is shut down due to mining strikes. Escondida's 2,054 union workers walked out on August 7. The union is demanding a substantial raise in addition to a $30,000 per worker bonus. Their last contract was negotiated in 2003 when copper prices were one-fifth their current price. Escondida's net profit soared to $2.9 billion in the first half of the year. The mine has hired 50 replacement workers and is considering adding more to increase production.

With or without a major strike, copper supplies are becoming tight. Since the end of 2003, commodity prices have been on the rise due to China's increase in demand. Some compare China's industrial boom with that of the United States in the late 1880's that transformed them into a global economic power. Copper is used in piping, wire, and applications across the electronics industry, to name just a few. Although copper production rose about 2% last year, consumption of refined copper rose by about 3.5%, according to Bloomsbury Minerals Economics Ltd, a London based consulting firm. However, over the past decade, spending decreased on mining exploration projects, causing the commodity shortage.

On a positive note, there are at least two large untapped copper deposits that are scheduled to begin production over the next 3 years. One deposit is located in Mongolia's remote Gobi region. Some experts believe that when the mine is fully developed, Mongolia's total gross domestic income could double. Production has been delayed by their government, as they have yet to finalize mining and tax laws to govern the project. Currently, production is scheduled to start in 2008. The second large copper deposit is located in Africa's Democratic Republic of Congo. Long delayed due to the country's political instability, the project is scheduled to begin production by early next year.

Copper markets typically operate in cyclical trends, with periods of high copper prices lasting 4 to 7 years followed by similar periods of lower prices. However, some analysts believe the current upswing of copper prices could continue over the next several years, even possibly creating a structural shift in the copper market. Given the decreasing global copper supply and increase consumption, copper prices might have begun their new upward path.

Look for more copper related updates from Allied Wire and Cable's eUpdate in the future.



Allied's NASCAR Connection

From NASA to NASCAR, wire and cable products are the lifeline in numerous industries. Allied Wire and Cable is proud to supply these products to those whose job it is to protect us: America's government agencies and police departments; But we are also proud to supply wire and cable to those who entertain us. Some teams from America's fastest growing sport, NASCAR, depend on Allied Wire and Cable.

Each weekend from February to November, fans are captivated by the pure exhilaration of the cars and trucks that exceed 200 mph. The sound, the smell, the speed, and even the wrecks, draw hundreds of thousands of people to these events.

But it's not all fun and games to those behind the scenes. Each race team has dedicated crews that work year round making sure that each car is ready to break records. Pushing limits however comes with a price. Just watching any given event, you will see fenders busted, tires blown and engines broken.

And that's where we come in. High profile racing teams such as Roush Racing, based in Concord, NC, depend on AWC's quality wire and cable products. Allied's own self-proclaimed "Gear Head," Craig Smith, is AWC's main connection to many NASCAR Nextel, Busch, and Craftsman Trucks Series teams, NHRA drag racing teams, and USAC Sprint Car teams. Craig lives in Mauldin, South Carolina, and loves working on cars in his spare time. He is extremely proud to be able to make a difference in American life, whether it is in the seat belt sensors that remind you to buckle up each time you go out or in your Sunday racing entertainment.

sources used for this issue