Having lost significant market share in recent years to lighter-weight and lower-cost aluminum, copper is ready for a rebound. But while proponents of the antimicrobial metal hope that someday every hospital wing, locker room and air conditioner interior will glow red, some metals analysts aren't so sure.
"I think there's a component of wishful thinking there," said Jorge Vazquez, an aluminum analyst at Harbor Intelligence. Although copper has been shown to exhibit germ-killing properties that could make it a tempting substitute for other materials, with such a high price tag the metal will be hard-pressed to make a mark on aluminum's turf, he said. "Aluminum-vs.-copper price competitiveness has increased considerably in the past five years. Aluminum is becoming cheaper and cheaper compared to copper."
Copper averaged $ 6,164 a tonne in August on the London Metal Exchange, more than three times its lighter-weight counterpart.
Max Layton, a commodities analyst at Macquarie Securities, said fundamentals were largely behind copper's higher pricing point relative to that of aluminum. "Both prices have increased, but copper has increased far more over the past six months, and the main reason is that copper has a much lesser ability to respond to changes (in demand)," he said. "The copper price collapsed and you saw 600,000 tonnes of price-related cuts, and I think maybe only half of that will come back given the recent price rally, whereas in aluminum, it's in massive oversupply and that's reflected in the prices."
David Wilson, director of metals research at Société Générale, agreed that stockpiles are the key difference between the two metals in today's environment. "The copper market is fairly tight right now, and even though there's been somewhat of a demand correction, the mining industry is still struggling to make its current production targets," he said.
High prices or not, even if copper does make headway into traditionally aluminum-dominated applications like heating, ventilation and air conditioning (HVAC) systems—where its antimicrobial nature could arguably increase copper's bang for the buck—the overall aluminum market is still unlikely to feel the pinch, Vazquez said.
According to Harbor Intelligence data, only 4 percent—or 745 million pounds—of total U.S. aluminum demand goes into refrigeration and air-conditioning applications each year, so a loss of that size could easily be made up in other market areas where aluminum is still making strides.
"Aluminum is gaining market share in the construction sector, in the electric sector and in the transportation sector compared to copper, so if indeed there is some real temptation to move away from aluminum towards copper (in HVAC systems) we don't see any meaningful market share being lost, given how strongly aluminum is penetrating other sectors. On the contrary, we believe aluminum will continue to gain market share over copper as a whole," Vazquez said.
Stainless steel also is unlikely to lose much sleep if copper gains a foothold in the medical metals industry, sources said. Although the hospital sector could mean a 380,000-tonne opportunity for antimicrobial copper, according to a presentation by Andrew Kireta Sr., president and chief executive officer of the New York-based Copper Development Association (CDA), that's just a drop in the bucket for stainless steel.
But even if aluminum and stainless won't take much notice if copper inches into their massive market shares, the possible change could still mean big things for copper itself. A far smaller market than either aluminum or stainless steel, copper could have a lot to gain from even a modest increase in demand due to its current and future supply constraints, sources said.
"Supply's ability to respond is very limited for copper," Layton said, noting that the copper mines of tomorrow likely will be smaller than the giants of today.
Wilson agreed. "Most of the relatively easy, accessible copper deposits are already being exploited. Big deposits are still out there, such as ones in southern Siberia and Mongolia and other difficult operating regions, not only geographically but politically," he said, noting that even if new mineralizations are discovered, it still takes 10 to 15 years to bring a copper mine on-stream. "This has been one of the major issues in mining over the past decade."
But a delay in new supply might not be such a bad thing, as even players in copper's corner admit it could take years for the new application for copper to really take off.
"We could say at this point the market is in it's early development stage," said Ed Rottmann, vice president of sales, marketing and product development at the ACR Tubes Americas division of Luvata Oy. "(Customers) are aware of the testing we're doing and more aware of this property of copper, but demand is currently at, well, the insignificant stage."