Are Copper Prices Putting Pressure on Estimators?

April 24, 2018 Tod Moore

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 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.

“The most recent numbers from the Bureau of Labor Statistics revealed a 4.8% rise in material prices between February 2016 and February 2017. Ken Simonson, Chief Economist for the Associated General Contractors of America, said this ‘sharp U-turn’ came after declines of 3.5 percent in 2015 and 2.7 percent in 2016.”

Part of that general rise in construction building material costs included “increases over the past 12 months (March 2016-March 2017) totaling 19 percent for steel mill products, 17 percent for copper and brass mill shapes, 8.8 percent for aluminum mill shapes, 7.6 percent for gypsum products such as wallboard and plaster, and 7.3 percent for lumber and plywood. In addition, the price index for diesel fuel, which contractors use directly and also pay for through surcharges on the thousands of deliveries to construction sites, soared 35 percent.”

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.  

 

Copper in modern construction and not-so-common uses

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 pipes

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 fertilizers 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.

 

Sustainable energy

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.”

 

So, how does all this impact the Estimator?

What we’ve basically established here are two key points Estimators should realize:

  1. The cost of copper changes routinely, and not always in line with other common construction materials.
  2. 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 realize 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 Author

Tod Moore

Tod Moore has served as Director of Sales at Trimble and Vice President of Trade Service for 27 years. Trade Service offers reliable pricing products, submittal management, ERP System Data, and eCommerce content for a variety of industries.

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