The brass producers and distributors are under pressure, and I don’t just mean water pressure [pun intended]. Copper and brass shipments in the USA have been down since the summer of 2007 due to continued cut backs in new housing construction starts. The housing industry is by far the largest end user of copper and brass products at around 40% of total consumption and finds it way into faucets and valves, brass fittings, HVAC or electrical wiring and connectors. The average new US single family home uses some 400 pounds of various brass and copper products. And, if the public begins to reduce spending on home remodels, there will be an even greater affect on the brass market because the ratio of sales for remodelling to new build is 3 to 1. According to Forbes, the news has not been pretty for building products manufacturer Masco and Home Depot
At the same time automotive was down 15% in the 4th quarter due to production cut backs at the big three and electronics was down 10% due to end product outsourcing. The net effect is falling demand for brass and copper alloy products which inevitably puts producers under price pressure as they seek to maintain market share.
The distributors have also had it rough. The Copper & Brass Servicenter Association reported last year that 200 series brass sheet was down 14% from the previous year. Plate was down 32%. This trend has not reversed in 2008.
At the same time copper, zinc and other alloying elements like tin have remained stubbornly firm. Over the last week we have even seen a rally in metal prices in response to fears about bad weather affecting zinc production in China and possible disruption in the supply of copper ores from South America and Africa. It remains to be seen what the Chinese do when they come back from the New Year holidays, our guess is they will stay out the market at these levels and we will see a return to January prices over the coming weeks. But this will be of scant comfort to the producers caught between persistently firm raw material costs and a falling market for their products.
Unfortunately the general expectation is copper prices, once adjusted for the recent rally, will remain firm in the short term although with a lot of new capacity coming on stream later in the year. Furthermore, the Chinese market is showing signs of cooling prices but more likely later this year. Zinc prices have been driven as much by demand for galvanized steel as for its use as an alloying element. For the time being at least galvanised steel is in high demand globally which won’t help ease the zinc price. One of the problems the US brass market is facing is disruptions in supply caused by the weak dollar. Imports which traditionally supply a portion of the market have been severely restricted, a welcome release for the brass mills but of little help to distributors and consumers who have not only faced higher prices than they would like but also delivery delays and stock outs.
All in all, not a great time to be buying Brass.