HEAT EXCHANGER COST HIGHER?

March 23, 2007

In discussions with many of you, I have heard a familiar theme.  We budgeted for a new high pressure feed water heater; I went to place the order only to find the unit is now significantly more expensive than six months ago.  Why?

To answer this question, I have turned to our contacts in the scrap industry.  The consensus of these experts is summarized in the next three paragraphs

• China

China is now the fourth largest economy in the world after the USA, Japan and Germany.  Their economy is growing at 10% per year.  China is now the largest consumer of copper and stainless steel.  The Wall Street Journal (WSJ) on March 16 reported that copper imports for China for January and February, 2007 totaled 321,743 metric tons, an increase of 112.9% from last year’s total for January and February.

Couple this large metal consumer with other fast growing economies such as India, and you have a sharp increase in demand in the last five years.

• Domestic Consumption

In certain types of metals, we have seen an increase in demand.  As an example, many road and bridge construction projects are now calling for stainless steel rebar rather than ordinary carbon steel products.  The engineers are finding that these concrete structures will crack exposing the carbon steel reinforcing rod to corrosion, thus weakening the concrete structure.

• Wall Street

The commodity markets have seen an increase in the amount of hedge fund capital.   This increased amount of capital has caused the price of all commodities to increase.  These hedge funds are fueled by the availability of enormous amounts of borrowed capital.  Even today, Japanese and Swiss banks are loaning large amounts of yen and Swiss francs at very low rates.

To learn more about this you can visit Scrap magazine.  Scrap magazine is a magazine published by Scrap.  Scrap is published bimonthly by the Institute of Scrap Recycling Industries, Inc., the “Voice of the Recycling Industry.” ISRI represents more than 1,450 companies that process, broker, and consume scrap commodities, including metals, paper, plastics, glass, rubber, electronics, and textiles. With headquarters in Washington, D.C., and 21 chapters nationwide, ISRI provides education, advocacy, and compliance training, and promotes public awareness of the vital role recycling plays in the U.S. economy, global trade, and the environment. For more information on Scrap and ISRI, visit www.scrap.org and www.isri.org.

Will prices ever drop?  According to a recent article in the WSJ dated March 15, some industry experts expect copper prices to drop from the present $2.82 a pound to a range of $1.50-1.75 a pound by 2009.  This drop is predicted due to copper suppliers opening closed mines and developing new ones.  Similar scenarios are predicted for other metals.

I hope this article helps you better understand this truly amazing metal market.  If you have questions, please contact me at alan.miller@heatinternational.net.  I may not be able to answer all your questions, but we can have fun discussing these issues!

Link: http://www.scrap.org/
Download PDF: 2007_Market_Forecast.pdf