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Soaring Copper Prices Sees Rise in Local Theft

February 8, 2011

Down the hill from where I live a construction project in 2007 had 24/7 guards to keep copper-poachers from thieving copper from the site. It is now a world wide problem as copper prices keep rising.

New Zealand Herald reports:

Scrap metal dealers and exporters say soaring commodity prices are bringing challenges to an industry that’s worth $2 billion a year to the economy.

Copper futures in New York hit a record US$4.63 a pound on Monday.

Clark Proctor, managing director of Metalman, a Manukau scrap metal buyer and exporter, said prices for steel, lead, nickel and aluminium had also seen rallies on the London Metal Exchange (LME).

But he said rising metal prices put pressure on cash flow in his business.

Metalman was forced to pay more for materials, while its margins remained almost unchanged.

“Most people in our industry – if they’re honest with themselves – would prefer the copper price to be at lower levels,” said Proctor.

Scrap metal is a big foreign exchange earner for this country, with its annual turnover worth almost twice as much as New Zealand’s wine exports last year, which fetched just over $1 billion.

Entire article, click here

Related: Coin Collectors blog:
For numismatists watching production at the U.S. Mint, this means that the material costs to produce U.S. coins will increase. With the exception of the cent, the predominant metal used in the manufacture of U.S. coins being copper—the Lincoln cent is 97.5-percent zinc with a coating using a 2.5-percent copper coating. Since most coins are composed of an average 88-percent copper and the nickel containing 75-percent copper, the rise in the cost of materials will reduce the seigniorage (profit) collected by the U.S. Mint.

Second most used metal used in U.S. coinage is nickel. While nickel has been up for the last six month and approaching its one-year high, it is down from its previous high reached in 2007 when it the U.S. Mint said the cost of manufacturing the nickel was nearly double its face value. If we use the average production costs from the last three years of 21-percent of face value (as reported in the U.S. Mint Annual Reports), it costs approximately 8.16-cents per coin to manufacture (metals cost 7.06-cents and approximately 1.1 cents to manufacture).

As for the Lincoln Cent, it has fared better in its materials cost. The price of Zinc has also dropped from its five-year high and is trading around $1.09 per pound. Zinc is also in ample supply to meet market demands meaning that the price should not be that volatile. This means that the materials cost to make the Lincoln Cent is 0.644-cents. Using the average cost to manufacture the cent at 35-percent of face value (as reported in the U.S. Mint Annual Reports), the overall cost to manufacture the cent should be on par with its face value.

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