Just one single buyer has gobbled up more than 50% of all the copper held in the London Metal Exchange warehouses, giving it firm control over this crucial source of supply and raising serious concerns among traders about the potential for higher prices as reported in Monday’s October 27th Wall Street Journal.
Why should this concern you as a buyer of transformers?
In a typical large transformer, roughly 50% of the cost is in materials. Of that, about 15% to 20% is for copper and an equal percentage is for steel core laminations.
With this recent buying concentration under a single firm’s control we see a recent trend of copper prices being driven up. Which in turn will unfortunately lead to the price of transformers rising in 2015.
Although the identity of the actual buyer is secret, it is believed that Red Kite Group, a London hedge-fund manager that focuses on metals trading is the one doing the buying.
We also note that the current copper production from miners is running behind the global demand for this metal.
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