Copper's Building Construction Markets Remain Strong

June 16, 2000


Prepared for American Metal Market

New technology and changing lifestyles have strengthened copper's position as a most-favored construction material. This is certainly the case in the U.S.A. (where copper consumption is more closely documented than in most other countries), but it also appears true elsewhere in the world.

Tony Lea, vice president for building construction for the International Copper Association, Ltd. (ICA) points out that worldwide copper consumption rose in the 1990's at a compound rate of 3 percent - much faster than the 1970's and 1980's. Furthermore, Lea sees significant opportunities for further growth as economies continue to develop.

The healthy U.S. markets have been especially favorable for copper. According to the Copper Development Association Inc. (CDA), the building construction market, copper's largest consumer, continues to perform very well. Building construction accounted for 41 percent of the 9.32 billion pounds (4.23 million tonnes) of mill products consumed in the U.S.A. in 1999. Over the past decade, overall copper consumption in this market has grown at approximately 1.5 times the growth in real U.S. GDP.

Building Wire, The Largest Building Construction Sector

New U.S. housing starts continue to hover at or near 1.5 million per year generating a steady demand for building wire and cable products, which range from ordinary house wire to commercial and industrial cables. But what has really spurred this market is America's appetite for increasing amounts of electric power to operate the growing number of appliances, lights, electronics, air conditioners, games and gadgets ¾ more of everything with a plug attached.

The nine-fold increase in U.S. residential power consumption between the 1950s and the 1990s prompted parallel growth in wire and cable consumption, which rose from 690 million pounds (313 million tonnes) in 1979 to 1,475 million pounds (670 million tonnes) in 1999. There is no reason to believe that U.S. electrical power thirst will abate anytime soon, and copper should continue to benefit accordingly.

Several recent technical issues suggest that even more copper wire and cable will be needed in the future. The first is electrical energy efficiency, i.e., using less power to perform a given task. This issue has strong environmental overtones, since better efficiency reduces the need for additional power plants, lowers fossil fuel consumption and decreases greenhouse gas emissions.

Better efficiency generally calls for using more or heavier copper conductors, and it's mainly a concern for industrial and commercial users, who consume large amounts of electric power. Bill Black, CDA's vice president for electrical markets, notes that installing larger-than-specified copper cables for heavily loaded lines increases efficiency by reducing resistive losses, saving customers money in the long run. Copper-intensive products like premium-efficiency electric motors and transformers yield the same sort of savings.

In homes, installing more copper provides other benefits. Says Black, "Higher efficiency is a spin-off benefit from something as simple as increasing the size of wiring in the walls from AWG 14 (1.63-mm diameter) to AWG 12 (2.05 mm). That's primarily done to provide a safer installation and create capacity for future expansion, but the heavier wire operates cooler and therefore wastes less power."

The benefits of upsizing are catching hold, according to Black. "AWG 12 wire has already become commonplace in new construction," he says. "And that's gratifying to us, because upsizing to AWG 12 wire represents a 60 percent increase in the weight of copper per foot."

Another factor driving up the demand for building wire is the need for good power quality. Power quality is defined as the uninterrupted, undistorted flow of electricity at the correct voltage; computers and other sensitive electronic equipment need it to operate reliably. Electronic equipment also works best when the electrical system is properly grounded. High power quality and good grounding are achieved by installing additional circuits and heavier wires and cables.

Telecommunications Wire

Dramatic gains in copper consumption are occurring in telecommunications wires and cables that link computers with just about every other electrical and electronic device. Major growth for these copper products is already well established in the commercial and industrial sectors, and very significant gains are expected in residential markets in coming years. Grayson Evans, president of The Training Dept., a Tucson-based consulting organization specializing in home networking, expects a "huge" expansion of home telecommunications networks in the near future.

According to Evans, "Demand for home networks is being driven by the computer industry, which is bringing us ever more interactive products, and by the audio-visual industry and its continuous stream of new technology. Much of that technology, like downloadable music and images, is tied to the Internet."

Evans maintains that the overall outlook for copper is very positive, although there are some transient downsides. Today's home-network technology is primarily "wireless" that is, the equipment operates on radio frequencies (RF) and therefore doesn't require new wiring. However, wireless technology doesn't always work too well, and its growth may be restricted by the bandwidth limitations of the few RF frequencies the FCC can make available. That's very good news for copper, because even the bandwidth requirements of the most advanced home networks can readily be accommodated by the Category 5 and 5E twisted-pair copper cables that are widely available today. Another piece of good news for copper is that the cost of wireless technology goes up rapidly at high bandwidths, while the cost for twisted-pair copper cable remains relatively flat. As bandwidth requirements rise-and they will-copper stands to gain.

Networking infrastructures-the cables, distribution devices and network interfaces that connect our new gadgetry-are currently being installed in more than 10 percent of new homes. Conservative estimates see around 700,000 new homes per year being wired for networks by 2020. Beyond those new-builds are some 800,000 existing homes that will be rewired every year to accept the new technology. This growth process has already begun, says Mr. Evans, but he doesn't think we've seen anything yet. "The only limitations I can foresee are the speed at which the market can be made aware of the benefits of the new technology, and the availability of skilled labor that will be needed to install it."

Plumbing Tube and Fittings, Going Flat-Out Despite Competition

Copper water tube dominates the North American plumbing market.

Andy Kireta, Sr., CDA's vice president for tube, pipe and fittings, remains optimistic despite the threats posed by cheap alternatives. He notes that "Even though the plumbing tube market has been deluged with plastics over the past several years, copper is maintaining a strong 80+ percent market share. All U.S. tube and fitting mills are working flat-out to keep up with demand, mostly because people continue to demand the quality of copper."

ICA's Tony Lea sees favorable signs in Europe, as well, where consumption of copper plumbing tube reached a record 730 million pounds (approx. 330,000 tonnes) in 1999. "That's virtually identical with U.S. consumption." says Lea. "But to put this figure in perspective, you must understand that unlike copper's 80+ percent penetration in the domestic plumbing market, the metal only enjoys around a 60 percent market share in Europe overall. Having said this, despite the threats that plastics pose, we've actually tracked a gain in market share for copper in Europe over the past five years."

Plastics' low first cost is a factor in the U.S.A., according to Kireta. "Of course we have to deal with claims that plastics have a lower initial cost. But copper has a 70-year history of reliable service, and quality homes everywhere are still overwhelmingly being plumbed in copper. Also, the retrofit market continues to be strong because homeowners are less concerned about initial cost than they are in installing a quality product."

Kireta thinks he's identified a unique opportunity for the red metal. "One exciting new area where copper holds a definite cost advantage is natural gas service in the home. Flexible copper tube has always been used for propane service, but many installers don't realize that it's also approved for natural gas. Black iron pipe used to be the preferred material for gas service, but copper and corrugated stainless steel tube [CSST] have captured about 20 percent of the market in recent years. CSST led for awhile, but builders are now learning that copper is the lowest-cost choice, and we're beginning to chip away at the competition's lead."

Brass plumbing fixtures, fittings and associated hardware, the largest outlet for copper scrap, are also maintaining their position in a growing market. Alan Barry, group vice president, Masco Corp., sees shipments of brass goods continuing to rise, perhaps as much as 15 percent annually. The over-all market strength combined with homebuyers' demands for more amenities have so far protected shipments of brass goods. According to Barry, "Where once we saw two or three faucets in a typical home, now we're seeing six or seven."

There is also a very rapidly growing market for commercial copper tube, a class of products used mainly in air-conditioning and refrigeration (AC & R) equipment. In a recent speech delivered at the CDA's annual meeting, Heatcraft Inc. President and COO Horace E. French noted that air conditioning and refrigeration now comprise America's third-largest market of copper, and that the industry can expect sustained growth. "The market is being driven by external factors such as environmental concerns, regulatory issues, societal demands for comfort and global competition for labor. In addition, the amount of copper in AC & R equipment is rising. An average 2½-ton home unit contained about 17 pounds (8 kg) of copper in 1970. In 1990, that size unit contained 47 pounds (21 kg) of copper, and there are 51 pounds (23 kg) in a typical 3-ton home unit sold today."

Consumption of all commercial tube, including copper and alloys, reached a record 570 million pounds (260,000 tonnes) in 1999, up 63 percent in the past 10 years.

Architecture, Copper's Sleeper Success Story

Until the early 1990s, architectural uses for copper in the U.S. and elsewhere were generally limited to roofing, gutters and downspouts. Daniel Sternthal, manager of architectural programs at CDA, maintains that a major paradigm shift has overturned that tradition completely. He credits two factors for the change: "The first big development was a change in architects' conception of copper from that of a durable but somewhat limited roofing material to a much more versatile "covering" material that could be used on any building surface. That's an important plus for copper because it suddenly expanded our market. Buildings have only one roof, but they have many walls.

The second important development was the introduction of new technology. Says Sternthal: "In the past, architects basically only had thin, flexible sheets of copper to work with; now, we have exciting composite materials, including absolutely flat sandwich structures with copper-sheet surfaces and rigid metallic or plastic cores. The surfaces can be of copper, bronze or brass, and they can be pre-patinated. That opens a lot of possibilities to a creative architect."

The market is responding. Since 1991, shipments of architectural copper and copper alloy products have risen 66 percent, and, as CDA's Sternthal happily observes, "Sheet and strip producers can't keep copper in inventory."

Global Outlook Promising

In the developing world, copper continues to face challenges from building materials such as iron water pipe and aluminum house wire that are no longer often seen in Europe and North America. Lea observes, these applications represent a promising opportunity for growth as the global economy strengthens. China, where copper plumbing tube was virtually unknown and where penetration currently stands at only a few percent, could eventually become a significant consumer. Promotion will help reach that objective. Last year, for example, ICA-sponsored programs helped copper become a "recommended material" with the Ministry of Construction, an important Chinese government agency, and copper tube and fitting standards have been established at the national level. "It's a very good start." says Lea.

Opportunities for building wire are equally abundant in the developing economies. Many buildings in Eastern Europe and India and other developing regions still contain aluminum wiring. Copper gained a strong foothold in these regions in the 1990s, and consumption is now growing steadily.

Worldwide, wire and cable consumption can be expected to continue growing with increasing electric power consumption, aided, in developed countries, by demands for better efficiency and higher power quality. Copper wire should continue to displace aluminum in Eastern Europe and India. Mushrooming electronic technologies will demand better connectivity through copper telecommunications cables. Copper water tube, which maintains a strong share in U.S.A. and European construction markets, will likely gain added attention in developing countries, while commercial tube consumption will continue expanding globally as individuals demand more comfortable working and living conditions. Downside risks to copper include repetition of a global economic downturn and competition from lower-first-cost products such as plastic tube, which will continue to dominate markets in cash-tight economies. However, given copper's performance in the face of these challenges in recent years, the outlook for steady growth for copper in its building construction markets seems bright.