Sometimes there are large ups and downs in the scrap markets that come out of nowhere and take many people by surprise…and we always get asked why it happens. If were as easy as 1 + 1 = 2 that would be awesome, but it tends to be much more complex then that. We wanted to tell you about something that many people do not think of and that is the copper mines.
Everyone thinks about copper pipe, used wires, stripped cable, etc…but because so few people in the U.S. have ever seen, let alone worked at a copper mine, that tends to be a big asterisk for the copper prices. More recently there has been news about copper mine strikes, so to clarify how it affects scrap, we have a breakdown of the situation.
How Do Copper Mines Work?
There are hundreds, if not thousands of copper mines throughout the world, but only a few of them are big enough to really matter to the copper scrap market. There are a handful of very large companies that mine out the raw copper ore, and these companies are generally driven by union workers…and once in a while, that is where large spikes will come into play.
The unions will occasionally strike, and often when copper prices are very high and the world demand is strong, that is when they choose their spots to strike and stop copper ore production. When these strikes happen and a large feed of copper stops going into the global market we have seen very large spikes in the copper markets. If the strikes are at big mines or large groups of union workers then we tend to see the copper prices hit or gain much higher then normal.
Why Copper Prices Go Up
Cut off of production…it is a simple “supply and demand” and when thousands of pounds are no longer being mined daily you tend to have a large effect on the world markets. Instead of more raw copper being mined and pushed into new production, you now have a much heavier reliance on copper recycling throughout the world and that leads to copper going up.
This often will only happen in large union striking situations or long periods of time for strikes taking place. Some strikes are resolved quickly and that won’t affect the markets in any way, shape, or form…while other strikes will drastically hit the markets (in a good way for scrappers!) and cause swings as great as $0.30 increases!!!
Why Copper Prices Go Down
The strike ends. It is that simple sometimes and it makes people upset because sometimes you see the markets take a sudden drop out of nowhere and it takes people by surprise…but that is what could happen when you have an increase out of nowhere followed by a decrease because of the markets now having all of that copper ore being pushed back into it.
Suggested Reading: How Often Do Scrap Prices Change?
This is a frustrating thing because scrap yards do not know how talks go back and forth between union workers and the mining companies that are running them and because of that, you have a lot of questions with the markets.
The problem with strikes is that they are often an artificial increase and as soon as they get resolved they tend to erase all of the gains…and sometimes more than the gains that had been seen which always is a disappointing thing for scrap yards and scrappers alike.
How To Anticipate?
Well…unless you or someone that you know has an “in” down in Chile, Peru, Mexico, or any of the other large world mines…it is tough to know. These come out of nowhere and often can be a great upper…..but a swift downer at the same time.