Highly conducive, easy to bend, and tough to corrode, copper is a crucial material in the electronics manufacturing industry. However, as sourcing specialists know from 2020, crucial doesn’t always equal available.
A 2024 shortage of copper wire and other copper-based electronic supplies has original equipment manufacturers (OEMs) in the electronics industry facing major challenges:
To mitigate the impact of raw material and component shortages, some OEMs invest in recycling and reusing copper e-waste. However, frugality can’t fully account for this level of scarcity, just like planning more production facilities didn’t magically halt the semiconductor shortage post-COVID.
Why is the copper shortage happening, and what can you do about it? Let’s take a closer look at what buyers can expect from manufacturers and distributors – in terms of both pricing and solutions.
Copper hit a 2024 high in early April at $4.323 per pound, the highest price recorded since June 2022. The price caused backlash from buyers, resulting in a setback in purchasing during May.
What’s brought us to such high prices?
Renewable energy capacity is a priority, with goals set to triple current levels by 2030. Great news for the environment, but less so for electronics OEMs – the average electric car uses around 144 lbs. of copper, more than 2x what's in a gasoline-powered vehicle.
Meanwhile, while demand has risen, supply concerns have come to light. An unfavorable Supreme Court ruling in Panama halted mining efforts at one of the world’s largest copper repositories.
With ongoing reliance on copper for technology and sustainable energy, the demand is expected to remain steady. New mines haven't been ramping up to full operation in time to help offset this struggle.
And with financial analysts expecting the Federal Reserve to weaken the U.S. dollar by cutting rates in 2024, they predict further price increases with the potential to break all-time highs.
A shortage of any key material can limit the production capacity of OEMs, including:
However, the impact of copper scarcity starts at the top of the supply chain – in this case, more of a pyramid. This trickle-down can put pressure on profit margins – pressure eventually passed on to buyers.
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Raw materials cost more for the component maker |
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The component maker has to raise prices for the distributor |
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The distributor has to raise prices for the buyer |
Copper is essential to the creation of many electronic parts. Components that require copper to function to their fullest include:
The best time to prepare for an unexpected expense is well before the potential issue becomes reality. With that in mind, proactive approaches to reducing the impact of price increases include:
The best way to avoid downtime waiting for a material supplier? Know another material supplier.
While no one can predict the future, electronic supply shortages have been a reality since 2020 and shouldn’t come as a shock anymore. By developing relationships with multiple suppliers, you won’t be held hostage by a single source of copper-based components or raw copper.
If you don’t have time for that kind of outreach, find a distributor that’ll do the footwork for you. A distributor with long-standing relationships with multiple suppliers can help you pivot when necessary. In fact, distribution partners with forecasting and inventory management services may already have a plan for copper shortages.
We all know the phrase “If it ain’t broke, don’t fix it.” Copper has long been a reliable conductive material for electronics production, so finding an alternative hasn’t been a big priority. With today’s shortages, however, many manufacturers and suppliers alike are realizing they may need to pivot to a close-enough material.
The sourcing department can learn a lot from closer collaboration with their design and engineering teams. Get involved early in the design phase. See if the engineers can adapt it to use less copper wiring or fewer components, if not an outright substitute.
In manufacturing, alternative materials for copper are already appearing and growing in popularity:
There’s always the potential for a new substitute to break through the status quo. Now’s a good time for companies to invest in R&D of lighter materials or clean-energy technology to reduce material costs.
When storage space is a finite resource, the decision to rely on just-in-time inventory from your supplier makes sense. However, even one snag in the part pipeline – let alone multiple – can cause massive downtime for your production.
The strategic stockpiling of key copper-based components might be worth the loss of some floor space at your facility. Working with a distributor that provides warehousing services and deliveries on a schedule is an option if your facility space is at a premium.
Long-term contracting with a distributor can also stabilize prices. The term of the contract is set – you’ll know the cost of components and deliveries throughout that time period.
A little co-planning ahead can solidify your production budget, regardless of shortages or transportation concerns.
Speaking of planning ahead! Making an accurate long-term copper pricing forecast can result in speedier procurement and better budget management.
If your sourcing staff lacks the bandwidth or industry experience to perform deep-dive looks into the future, consider using a distributor. A distributor with forecasting services will regularly research and analyze component and raw material data on your behalf. Your neighborhood friendly distributor’s probably already running data analysis on copper for someone else – why not tap into that yourself?
The copper shortage surely won’t be the last material crisis of your career. Stay on top of market trends, and you’ll find purchasing decisions much easier. Data analytics can predict market trends and make purchasing decisions easier.
A shortage isn’t coming – the 2024 copper price forecast says it’s already here.
Hopefully you’ve at least gotten a better understanding of copper price influencers, from raw material supplier to end user. The good news is that there are alternatives to your existing sourcing methods, and delays don’t have to be a given.
Better use of data analytics and inventory management can directly impact the flow of production for your facility. With a proactive plan and perhaps a distribution partner, the clean copper current price becomes less of a pressing concern and more of a minor nuisance.