好色先生TV

Lead times summary

Rotary (no change) and precast piling (no change) lead times are still at seven and six weeks respectively. However contributors have commented that the volume of enquiries remains high and a number of projects are likely to go ahead.

After last quarter鈥檚 decrease, concrete works (up) have increased one week to six, because of a general increase in workload.

As predicted in last quarter鈥檚 report, the average lead time for structural steelwork (up) has increased one week to 14 overall, largely because of an increase in the manufacture period as more work enters the marketplace.

Reconstituted stone cladding (no change) lead times have been maintained in the period at 28 weeks, although suppliers say that increasing demand may impact on lead times next time. Natural stone cladding is also unchanged at 29 weeks, with pressure on production resources having been accommodated in the overall timeframes.

Curtain walling (no change) lead times have been kept at 18 weeks for the third successive update, with all contributors reporting a period of relatively quiet activity.

Lead times for atrium roofing (no change) are still at 29 weeks overall although suppliers report they are having to turn away work in order to maintain this lead-in.

Membrane (no change) and profiled roofing (no change) stayed at nine weeks and 14 weeks respectively.

The lead-in for facade cleaning equipment (no change) has stabilised at 26 weeks after recent increases. Suppliers say that although order books are strong, further increases have been controlled through better planning.

Metal windows (no change) are unchanged at 15 weeks as are lead times for brickwork and blockwork (no change) packages, at four weeks.

Lead times for drylining (no change) are unchanged at nine weeks for the third successive period. Suppliers report price increases in steel and insulation supply as a more pressing issue.

As expected, demountable partitions (no change) have been kept at nine weeks with previously reported spare capacity still holding true.

Lead times for general joinery (no change) have been maintained at 12 weeks overall although suppliers report an upturn in enquiries that could mean an increase next time. Specialist joinery (no change) is also unchanged, at 17 weeks.

Raised floors (up) have increased one week to seven overall because of a boost in workload and pressure on resources. Suspended ceiling (no change) lead times are still at 15 weeks.

Architectural metalwork (down) suppliers have decreased lead times one week to 13 weeks with suppliers saying reviews of their supply chains have resulted in time improvements.

Decorating (no change) is unchanged at five weeks, and lead times for internal stone finishes (no change) have also been maintained, at 16 weeks.

Non-standard lift (no change) lead times have been maintained at 41 weeks overall for the third successive report.

Ductwork (no change) lead times are maintained at 10 weeks. Sprinkler installations (up) are back up to 10 weeks after last period鈥檚 reduction, with contributors saying a skills shortage is affecting the overall lead time.

The average lead time for electrical packages (no change) has been maintained at 13 weeks overall with variances across specific elements such as luminaries generally at six to eight weeks, modular wiring at six to eight weeks, switchgear at eight to 10 weeks, generators at 11 to 14 weeks, transformers at 12 to 16 weeks and uninterruptible power supplies at seven to nine weeks.

The lead times for both IT infrastructure equipment (no change) and data and voice cabling (no change) have been kept at seven weeks, although suppliers report they are increasingly being asked to produce schemes quicker, which is placing pressure on resources.

As predicted last quarter, there have been further increases in lead time in several areas of the supply chain although generally the period has produced only minor movement across the different sectors.

(See attached below: 鈥淟ead times graph鈥�)

鈥� To contribute to this article online, please visit or contact foresite@mace.co.uk or pdalton@mace.co.uk

Spotlight on - copper

01 What is copper?

During the Chalcolithic period, man discovered how to extract and use chalkos, the Greek word for copper, to produce ornaments and implements. As early as 4000 BC, copper was being extracted from Spain鈥檚 Huelva region. At about 2500 BC, it was discovered that when copper was alloyed with tin it produced bronze 鈥� hence the Bronze Age.

Copper has excellent conductive abilities for both electricity and heat as well as being flexible, strong, durable and resistant to corrosion. These benefits have led to its use in many technological advances such as telecoms and electricity as well as air-conditioning, heating, plumbing and for most electrical systems such as radio, TV, lighting, computers, motors, phones, wiring systems and so on.

Copper is currently in no risk of running out as a natural resource 鈥� global resources are estimated at more than 2.5 billion tonnes, of which only 0.32 billion tonnes have been mined. In addition, most of the copper mined to date is still in use today, as copper is one of the most recycled of all metals. Copper is one of the few metals that is fully sustainable, if used sensibly and recycled.

02 Market conditions

The copper market is currently fluctuating at extraordinarily new highs. The market prices are varying hour-by-hour, let alone day-by-day, by up to $400 (拢213) (conversion 拢1 = $1.875) per tonne on average. One day in May even recorded a rise of $870 (拢464) showing the volatile nature of this commodity. The Observer noted that 鈥渃opper prices have been reaching new highs for months鈥� in May last year 鈥� based on delivery for three months ahead, copper was worth just over $3000 (拢1600) per tonne. However, in May this year copper reached the dizzy heights of $8875 (拢4733) per tonne.

As can be seen in the graph below left, provided by , the price increase has been fairly steady since August 2002 at just under $2000 (拢1067) to March 2006 at about $5000 (拢2666) 鈥� a strong increase of 150% over three-and-a-half years. The main reason for this steady but strong increase in price would appear to be down to the fast-growing economies of Asia, of which the main influencing parties have been China and, to a lesser degree, India.

China鈥檚 industrial revolution has caused the demand for the commodity to rise to 23% of the world鈥檚 production, and since 2002 it has been the world鈥檚 largest consumer. This demand, along with the rest of the world鈥檚 requirements for copper, has meant the production and supply of this commodity are pushed very hard. There are predictions within the market that demand this year will increase to between 4% and 5.5%, giving a total demand of 17.5-17.8 million tonnes 鈥� whereas in 2000 the demand was more like 13 million tonnes.

This year, prices have shot up at an alarming rate, causing all sorts of problems within the building services industry 鈥� namely cost and lead time increases for switchgear, cables and copper pipework. Prices have risen from about $5000 (拢2666) in March 2006 to $8875 (拢4733) per tonne in May, a 77% increase over just three months.

This sharp increase is speculated to have come about for four key reasons:

 

• Some of the larger mines are having difficulties this year because of labour unrest and strikes 鈥� for example, La Caridad mine, one of Mexico鈥檚 biggest producers, was affected by a two month strike. There are numerous other factors that can affect mines such as political matters and bad weather affecting production and transportation.
• There is a reluctance for mines to increase production and expenditure to meet demand, as this could bring prices down and leave the mines with a shortfall in profit because of the increased mining costs to meet the demand.
• There is increased investment interest in the commodity by US and European hedge, index tracking and pension funds. Bloomberg.com has said that 鈥淗SBC analysts were estimating an investment of around $100bn (拢53.32bn) in the commodity indexes by the end of 2006, compared with $10bn (拢5.33bn) at the end of 2003鈥�.
• The last key reason that could be affecting the higher prices and longer lead times, is the minimal stock levels from the increased demand and production shortfall. However, the London Metal Exchange reported that while 鈥渟tockpiles up by 19% from last year, this was still only equal to less than three days global usage鈥�.

03 Tender prices

Copper prices have been affecting the tender prices of building services since about the end of 2002. Up to mid-2004, these increases were probably being taken up in the general risk contingencies applied to cost plans. After mid-2004, the increase was recognised as more of a problem, and cost plans were being produced with this in mind, either by increasing the general rates or including more specific risk allowances.

The greater problem, which has caused a few budget difficulties of late, has come about since March this year (see Market conditions). This level of price increase can, and has, occurred in the period between detailed cost plan stage and the tendering for a number of projects.

Taking into account that most items and systems within the building services elements have copper in their make-up, it is possible to begin to understand the scale of problem.

The three key elements that have been affected are HV/LV switchgear, all copper cabling and copper pipework systems. The first two elements are also impacted by the increased steel and oil prices that form most of the remaining costs of these elements 鈥� that is, the steel fabrication of panels, steel used in the wire protection of some cables and the oil used in the insulation production.

The following increases since March 2006 are being identified by tenderers, based on current June 2006 costs:

 

• HV/LV switchgear: 20-40%
• Copper SWA cables: 50-80%
• Copper pipework: 2-30%

The above figures are probably also being compounded by the high current workloads in the building services and construction markets. This is mainly because of the strong continued public sector spending and the increase in the commercial sector. This demand is looking set to continue during 2006, and into early 2007.

04 Lead times

The lead time for copper procurement 鈥� HV/LV switchgear, all copper cabling and copper pipework systems 鈥� has been affected since the demand started to outweigh the supply. The problem for lead times appears to come from the mills not being able or willing to meet demand, and from suppliers or manufacturers of the elements not stocking sufficient quantities of copper because of the shortfall and/or the fluctuating market prices putting them off buying and holding stocks.

Last year, refined copper production for copper bars used within HV/LV switchgear, was about six weeks鈥� delivery to switchgear manufacturers. Currently David Butters, divisional director Holme Dodsworth, is having to quote lead times of up to 16 weeks because of the difficulty of obtaining the copper from the mills/smelters.

The table below (鈥淐opper lead times comparision鈥�) compares last year鈥檚 lead times with current ones.

05 Future developments

There are a few developments that could help alleviate the current price and lead time problems. These are possible options only, not necessarily the best or even achievable in the immediate or distant future.

 

• Plastic pipework is an option that is currently in use for a number of pipework systems, especially waste and domestic water pipework. There are plastic alternatives for almost all pipework systems, although whether it鈥檚 the best design is a separate issue. In addition, oil 鈥� with its own pricing and sustainability issues 鈥� is required in plastic production.
• Aluminium bar can and is currently used in lieu of copper bars in certain electrical designs, where suited. Aluminium is about one-third cheaper than copper, although its prices have risen about 35% in the past two years. It is not as good a conductor of electricity as copper, so for a like-for-like design, a greater quantity is usually required, which in turn can create space issues.
• Fibre optic cabling is currently used in certain data and voice communication systems, in lieu of copper cabling. However, it comes with specific installation constraints that have to be adhered to, such as bend radius. Fibre also has some high equipment costs for the conversion of the data into light pulses and back again.
• Wireless technologies can reduce the requirement of copper cabling for data and voice communication systems. At present the wireless technology is not as fast as hardwired systems and it also has certain security risks associated with transmission of confidential company data via the airwaves.
• Superconductors would be a means to change the whole power distribution and electrical supply requirements to buildings. If this technology could be made to work at normal temperatures rather than the current 鈥�269掳C, the losses incurred within the copper components and cabling could be reduced to almost nothing, as they and the power production requirements would be far smaller.

Future outlook

The future outlook for the copper market is still somewhat up in the air. Because of the current short-term investment interest, the daily price is continuing to swing up and down without any real levelling to it. The mines are still having labour issues which is impacting on their ability to meet the current demand. Stock levels are low and look set to stay that way with supply and demand problems as they are. This all reads as though the price will continue to increase. However, the short-term investors may start to lose interest, and China鈥檚 demand begin to stabilise, possibly even selling some of its copper stocks back to the market. This would take the stress off the mines, thereby allowing supply to start to meet or exceed demand 鈥� all of which would be manifested as a reduction in price.

As 好色先生TV went to press, the five-minute cash copper price as provided by BaseMetals.com, is showing the price at about $7090 (拢3844). If we go back to May 06 was $8875 (拢4733) per tonne.

It seems the future outlook for copper is uncertain. If there is one recommendation that can be made, is that a close eye is kept on all metals, not just copper, and firms should warn clients early of any possible change.