The question of how the price of copper impacts estimators seems overly simple on the surface: Obviously, the cost of a basic construction material like copper is going to change the cost of materials on the estimates they produce.
So, why should you invest the next four minutes in reading this article?
Because the full impact of copper’s price fluctuation isn’t quite as simple as it sounds. And, even on the surface, many estimators fail to take this kind of variable into consideration often enough. The result can be even more money disappearing from an already thin profit margin. So, let’s look into the details and see how estimators can do a better job of staying on top of this (and similar) factors to create the best possible estimates.
What has been going on with the copper price lately?
Globally, the cost of construction materials was at record high levels in 2012, then dropped off significantly in the years between 2013 and 2016. Copper saw some of the greatest fluctuations in price during this period but generally kept pace with other vital construction materials.
It was reported in early 2017, by the Federation of Master Builders, that 70% of UK builders had seen a rise in costs due to a weaker pound putting strain on imports. Throughout last year, further rises of 10-15% were expected, causing more complications and pressures on smaller building firms. The number of UK builders reporting price rises increased to 90% in 2018, which is the highest amount on record.
SME’s were reporting an increase of 22% on Spanish slate and 20% increase in timber products. Insulation and brick prices have also seen price rises, with further rises fully expected over the coming months. The worry being that almost a quarter of all UK building supplies are imported, showing again just how vulnerable the UK building market is to rises in materials and commodities. This along with the rising costs of skilled labour is putting intense pressure and challenges on builders. Diesel fuel has also seen heavy increases over the last couple of years, with prices back up to the highest levels in 3 years.
''UK builders reporting price rises increased to 90% in 2018.''
2017 proved to be a banner year for copper investors who saw the value of the metal soar 30.9 percent. “According to MetalMiner IndX data, LME primary cash copper was $5,512/metric ton on Jan. 1, 2017. It closed the year at $7,215 per metric ton (/mt). Not surprisingly after a strong run, the metal tracked back a bit in the early days of 2018. LME copper opened the year at $7,180.50, and closed Jan. 17 at $7,045.”
And, the very latest figures bear out the continuing fluctuations — in just the last 30 days before this article was written (on April 17, 2018) the price of copper has seen a high of $3.18 and a low of $2.95 per pound (a 7.5 percent drop) before rising again to $3.10.
So, in short, the price of copper has been generally following the same pattern as most construction materials: rising slowly but steadily for over two years now. However, unlike some other material commodities, the day-to-day cost of copper tends to fluctuate more, revealing its susceptibility to market forces beyond simple supply and demand.
There are some obvious uses of copper that every MEP estimator is going to be familiar with, and some that are not so obvious:
Copper piping is very popular for plumbing, especially in remodels and upgrade projects where old lead and steel pipes are being replaced. Sustainable Copper noted this as one of five trends to watch in 2018:
“As a durable, reliable, and long-lasting metal, copper is particularly useful in the construction of water pipe infrastructure. It is also impermeable and prevents contaminants such as petroleum, insecticides, and fertilisers from polluting the water system. Unlike lead, copper is also corrosion-resistant, and is a necessary nutrient for human life and development.”
They went on to note that copper piping is increasingly being sought out for large-scale infrastructure projects in addition to smaller residential and commercial construction use.
Electrical wire and components
Sustainable Copper also noted the fact that “electricity requires a great deal of copper for production, distribution, and transmission. Copper is an excellent electrical conductor and operates well at higher temperatures to help electrical systems connect to the larger grid.”
As a result, large-scale construction projects involving power generation and distribution — expected to increase in size and frequency as human demand continues to explode worldwide — will continue raising the demand for copper.
Along the same lines, a third trend Sustainable Copper describes is the increasing demand for copper in the construction of sustainable buildings, renewable energy generators (such as wind turbines), and new applications for that energy.
“Wind turbines use copper for grounding wires, power cables, transformers, inverters, lightning protection, and as part of generators and control systems. A single wind farm can contain 4–15 million pounds of copper! Copper is also a key component of solar energy systems, increasing the efficiency, reliability, and performance of photovoltaic cells and modules. Copper’s superior electrical and thermal conductivity are vital in the collection, storage, and distribution of solar energy.”
Less obvious construction materials and applications
“The applications of copper in building construction are nearly endless. Some of the uses include roof and wall cladding, flashing, gutters and downspouts, wiring, plumbing, heating systems, ventilation, and design elements.”
And why is copper so popular as a base material for construction? “Copper is highly durable and does not need to be replaced over the life of the building. Other benefits to copper as a building material include corrosion-and oxidation-resistance, low maintenance costs, lightweight, and antimicrobial properties.”
''Copper is highly durable and does not need to be replaced over the life of the building.''
So, how does all this impact the Estimator?
What we’ve basically established here are two key points Estimators should realise:
- The cost of copper changes routinely, and not always in line with other common construction materials.
- The demand for copper is not going to lessen anytime soon: it’s simply too valuable as a construction material with seemingly unlimited applications.
So, the modern Estimator would do well to keep the current copper price in mind while going about their daily activities. And, perhaps more importantly, monitoring the general trend of the price so that its near-constant fluctuation doesn’t need to translate to unpredictable profit margin on every job.
Additionally, it’s vital to realise every portion of a project where copper is likely to impact the cost of materials — beyond pure copper piping or wiring. From digital HVAC sensors to roof cladding, fluctuating copper prices are bound to create adjustments all across your estimate.
Granted, keeping track of all this information on a daily basis isn’t easy, and it can be time-consuming. A lot of successful estimators rely on cloud-based estimating software solutions that include continually-updated pricing information direct from the manufacturers and suppliers. With that tool at their disposal, they can be sure that the prices they’re including in today’s job estimate are as up-to-date as possible. Then, the only factor they need to leave to educated guesswork is where those costs are likely to be in the weeks or months between when the estimate is first created and the material purchase date.
About the AuthorMore Content by Tod Moore