Copper, enjoying much superiority over any other metal in electrical and thermal conductivity and also ductility is about 4 times as expensive as aluminium. But with China showing evidence of slowing growth for a seventh straight quarter, the 3 month forward prices on the London Metal Exchange for both red and white metals have come under some pressure. Not surprising since China accounts for 40% use of the two. At the same time, copper climbed 7% in the Q3 thanks to the economy boosting initiatives by the US Federal Reserve and the European Central Bank and China sanctioning some major infrastructure projects to cost USD 158 billion. Aluminium, too has gained ground to be trading close to USD 2,100 per tonne for identical reasons.
According to consultancy CRU, an LME chart shows that at the beginning of this century, copper enjoyed some price advantage over aluminium but nowhere like now. What happens when copper commands a premium of over USD 6,000 a tonne over the silver colored metal? The substitution gate in favour of aluminium will remain open. Experts at producers like UC Rusal, which will remain the world’s largest producer of aluminium ahead of Alcoa of the US will pursue with vigour the experiment with aluminium zirconium alloy. Successful conclusion of the experiment establishing the alloy’s resilience to withstand extreme cold and snowfalls in many parts of the world could see it being used in power transmission line manufacture replacing copper. Rusal hopes the immediate demand for transmission line made from the new alloy will come from Siberia and parts of the US. In both places modernization of power grids is long overdue.
In certain inherent properties and applications, copper comes a winner hands down. Deutsche Bank says that on the basis of copper being at least 65% more effective than aluminium it could cost 1.65 times more than the other metal without inviting substitution. But when that price ratio climbs to 2:1, aluminium finds an economic incentive to substitute copper..
The incentive for replacement of copper, if anything is more than at any time since the new millennium start. The bank however, points out no matter the copper aluminium ratio rising, the rate of substitution declined post 2007 as most easy to accomplish applications have been converted. Aluminium alone is not participating in replacing copper in areas of its application, though it remains the major beneficiary. In eight years to 2011, 3 million tonnes of annual copper use got replaced by various materials with aluminium alone having a share of over 50%.
From here, copper replacement will become increasingly more challenging depending on breakthroughs in technology. To give one example, aluminium has largely replaced copper in automotive precision tubing over last many years as part of moves to reduce vehicle weight and thereby fuel consumption. Groups like Hydro of Norway, which invest heavily in research and development are not deterred by completion of copper replacement in easier areas. They still see major potential for aluminium as a substitute for four times more expensive copper. A Rusal official says substitution campaign will take away annually 400,000 tonnes equal to 2% of global use of copper. An Alcoa estimate shows aluminium alone may replace annual copper use by 3.8 tonnes which is 20% of total copper demand.
BHP Billiton, in whose product portfolio copper has a significant presence is not however unduly worried about the red metal being replaced by aluminium or other materials. The company believes copper will remain a material of choice in its major areas of application on excellent energy efficiency and carbon sensitivity considerations. Experts say aluminium will have to contend with the handicap of its requiring a much larger cable diameter to attain an identical electrical conductivity as copper. Where space is the issue like underground cable and building wire, copper will be difficult to replace. Pointing to other substitution hindrances, an expert report says these relate to redesigning of parts, machine retooling and familiarizing staff members about the properties of new materials and their handling. Finally, savings resulting from switchover to a new material and its performance vis a vis the substituted copper will justify the exercise.
Source - World.einnews.com
(www.steelguru.com)
