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kieblera5
Penny Hoarding Member
USA
859 Posts |
 Posted - 03/27/2009 : 01:09:50
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So... I've been thinking (again). If spot prices for copper today are just under $2 a pound, why are prices for high grade copper at ~8-9 per pound online? Is there that much of a premium for high grade copper bullion? Someone needs to explain this to me (preferably someone in the business *ahem*)... I find that this is why I am leary of buying copper bars, since I see the spot at $2 and I have to pay $8. Is there somewhere to check the spot prices for investment grade copper?
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Democracy is being allowed to vote for the candidate you dislike least.
Never argue with an idiot. They will drag you down to their level and then beat you mercilessly with experience.
Caller number seven gets the Peace Prize!
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HoardCopperByTheTon
Administrator
USA
6807 Posts |
Posted - 03/27/2009 : 01:37:56
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Labor and manufacturing cost.. the same reason that pile of sheet metal and plastic you use to go to work costs $30-50k.
Try making your own. |
If your percentages are low.. just sort more. If your percentages are high.. just sort more.
Now selling Copper pennies. 1.6x plus shipping. Limited amounts available. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 03/27/2009 : 08:27:15
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The copper spot price is based on the bulk selling price of copper in the form that it comes from the refiner which is called copper cathodes. These copper cathodes are heavy, bulky, and very pure, but if you wanted to buy several tons of them that would be one way to invest in copper near the spot price.
You must be logged in to see this link.
The copper cathodes are turned into bar, rod, sheet, wire, etc and sold to manufactures or supply houses for a significant mark-up.
The supply houses then mark it up again and sell it to smaller manufacturers.
People on E-Bay buy the bar form of the copper after 2 or more mark-ups from a supply house and then cut it, polish it, and stamp a hallmark on it and sell it for yet a another mark-up.
If you don't want to buy cathodes by the ton or pay the E-BAY price, one thing you could do is find a local supply house and buy bar from them. They may even cut them for you for a reasonable price (they are pretty long). You could then polish them yourself or leave them as is.
You must be logged in to see this link.
Here is a supply house near me that I keep meaning to go visit, but never get around to...
You must be logged in to see this link.
Check out the copper in bar form from the metalsupermarkets home page (what it looks like before the guys on E-BAY cut, polish, and stamp...pretty!):
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Edited by - horgad on 03/27/2009 08:35:41 |
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vrbsroma
Penny Collector Member
394 Posts |
Posted - 03/27/2009 : 08:31:32
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| I'm not expert and not in the industry, but I've been told that "spot" is the value of the raw metal. Due to refining/labor costs, the price we pay is actually higher than spot. There are also higher premiums on the "name-brand" refiners' product. |
As far as I know, it is stated "In God We Trust" on the US dollar. How can I trust this currency if I do not believe in God?
Possession is nine-tenths of the law.
When I give my two cents, they're always copper! |
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kieblera5
Penny Hoarding Member
USA
859 Posts |
Posted - 03/27/2009 : 11:00:52
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Thanks, Horgad. Didn't realize that there were so many markups on bars throughout the whole process. I guess that if you manufactured the entire product, start to finish, that you could make a large profit. |
Democracy is being allowed to vote for the candidate you dislike least.
Never argue with an idiot. They will drag you down to their level and then beat you mercilessly with experience.
Caller number seven gets the Peace Prize!
Get coding tips, tricks, and more at: http://codingmonday.blogspot.com |
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Market Harmony
1000+ Penny Miser Member
USA
1274 Posts |
Posted - 03/27/2009 : 11:16:23
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quote:
Originally posted by kieblera5
So... I've been thinking (again). If spot prices for copper today are just under $2 a pound, why are prices for high grade copper at ~8-9 per pound online? Is there that much of a premium for high grade copper bullion? Someone needs to explain this to me (preferably someone in the business *ahem*)... I find that this is why I am leary of buying copper bars, since I see the spot at $2 and I have to pay $8. Is there somewhere to check the spot prices for investment grade copper?
Your thoughts are well justified. When you look at gold and silver spot prices, and compare that to the retail bullion market, the mark-up is not nearly as steep as it is for copper bullion. As you know, this is a topic that is near and dear to me. "Why is it this way?" is a question often asked.
Let's look at the markets:
- LME is the market where many look for the spot price of copper as well as other non-ferrous metals. These prices represent paper contracts for sales of copper from immediate to 27 months out: You must be logged in to see this link.. These contracts fluctuate just like the stock market and represent a metric ton (2205 pounds) of copper. The form of copper is in a raw state- bars and cathodes direct from mines or refiners.
Cathodes:
Bars:
In order for you to get this type of copper, you need to by large amounts. The typical contract is for 500 tons per order, and there are delivery charges as well as a low mark-up on spot.
What happens next is a level of value-added production. These cathodes and ingots are remelted and cast into raw shapes that will then be turned into everything from pipe, wire, tubing, sheet, and other products.
These then go through a final processing to specialized and finished products, then a distributor channel (either direct or wholesaler), then retailer to end user. Each layer adds additional cost to the finished product. The mark up from spot to end user varies on product, which has its own market (tubing market is bigger than special shape market, and therefore the mark up is lower because of supply/demand relationships)
But let's get to investment bullion copper... There are essentially 2 options: cut bars, or special products like rounds and cast shapes. Cut bars are relatively easy to make- you buy bars for one cost, cut it to size, stamp it, package it, and sell it. Cast shapes and rounds require additional labor and production steps, as well as different raw material costs. All of which I'd rather not get into too much detail.
The market for investment copper bullion is relatively small compared to the precious metals market. There are few copper suppliers of cut bars, and even fewer of special products. There is also a relatively small number of potential buyers for each. So when you take that into consideration, the supply and demand economics of this market will meet at a certain point, and that point is the price. In a down market, supply remains steady or even declines, and demand from consumers normally declines due to sentiment. Therefore, prices will also decline. In a down market, some suppliers will close shop, effectively decreasing supply. This reduction of supply has the effect of increasing or maintaining prices because theere is less metal on the market to meet the market demand. However, when a new up market starts, the demand begins to outpace supply at alarming rate, and prices skyrocket because there is not enough bullion to meet the market demand. New suppliers will enter the market to meet the demand, and prices will stabilize.
This economic evaluation is applicable to both the macro level (mines being suppliers) as well as the micro level (small scale mints being the suppliers) The only difference is cost of raw material, which was explained earlier. "How long does it take to open a new mine?" is an important question. As well as, "How many potential mines sites are there?" And to continue this, "What will be the cost of exploitation of minerals from a new mine?"
So, maybe that has answered some questions, and created others. I'd be happy to clarify anything I said, or answer questions spawned by my statements.
What I haven't revealed in the cost of mining and producing silver and gold. Silver is not normally mined just for silver alone. It is usually produced as a by-product of copper and zinc mining. The prices that mines charge for silver are a fraction of the spot price on the New York Metal Exchange. Mines will sell to a refiner, who turns tons into ounces, and then sells those ounces on the open market or to mints. Each product has different mark ups. Take for example a publicly traded company like Silver Wheaton in Canada. They have contract with mining company to buy their silver for $4 to $5 and ounce... but bullion buyers pay above spot to get the metal in thier hands, albeit in a different form.
In conclusion, yes, there is a discrepancy between spot and retail price of any metal. The retail price represents cost involved to produce, as well as supply and demand relationships. Specifically, copper has a small market for investment bullion purposes. However, as world resources become depleted, and costs prohibit new mines from being commissioned, the price of copper has serious upside potential. The problem when this happens won't be price, but it will be availability of supply. Demand will outstrip supply, and current prices won;t be seen. The copper investment bullion market has HUGE potential upside.
(sorry this is so long. I will most likely have to go back and edit this because I was just writing off the top of my head)
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goto the new and improved realcent: http://realcent.org |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 03/27/2009 : 12:01:19
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quote:
Originally posted by kieblera5
Thanks, Horgad. Didn't realize that there were so many markups on bars throughout the whole process. I guess that if you manufactured the entire product, start to finish, that you could make a large profit.
Yes, if you could figure out to refine copper yourself from scrap and pour your own ingots and could do it all without having to spend thousands on equipment, you could make some serious money. Although as Market Harmony says the market for copper investment bullion is very small... |
Edited by - horgad on 03/27/2009 13:19:27 |
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vrbsroma
Penny Collector Member
394 Posts |
Posted - 03/27/2009 : 12:34:00
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| MH, that was QUITE educational! Thanks! |
As far as I know, it is stated "In God We Trust" on the US dollar. How can I trust this currency if I do not believe in God?
Possession is nine-tenths of the law.
When I give my two cents, they're always copper! |
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Market Harmony
1000+ Penny Miser Member
USA
1274 Posts |
Posted - 03/27/2009 : 13:48:41
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quote:
Originally posted by horgad
...Although as Market Harmony says the market for copper investment bullion is very small...
When you look at the silver and gold market, the copper market is small... so, it is "relatively small"
But, I would hesitate to say the copper bullion market is "very" small. If you look at market for frog butt soup, and compare it to the copper bullion market, the coppen bullion market is huge
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goto the new and improved realcent: http://realcent.org |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 03/27/2009 : 14:22:43
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quote:
Originally posted by Market Harmony
quote:
Originally posted by horgad
...Although as Market Harmony says the market for copper investment bullion is very small...
When you look at the silver and gold market, the copper market is small... so, it is "relatively small"
But, I would hesitate to say the copper bullion market is "very" small. If you look at market for frog butt soup, and compare it to the copper bullion market, the coppen bullion market is huge
Seriously, the potential for the copper investment bullion market is huge. I think if somebody stepped in with some big bucks to invest in it, they could make it as popular as silver and gold bullion investing given a little time. |
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natsb88
Administrator
USA
1850 Posts |
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Copper prices... standard/high grade differences
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