Metal prices surge as reserves fears are highlighted
Telegraph Money Metal prices surge as reserves fears are highlighted
By Ambrose Evans-Pritchard (Filed: 27/01/2006)
Mankind has already used up a large chunk of the metal ever likely to be found in the Earth's crust and will face a supply crunch once Asia catches up with the West, according to a new report by the US National Academy of Sciences.
The study found that 26pc of all copper ore thought to exist has already been lost, either wasted in milling, smelting and corrosion, or buried in landfills.
The report, drafted by geologists from Yale University, said there were enough ore reserves to meet immediate needs but warned of an inevitable shortage down the road.
"It is clear that scarcity value will raise the real prices of scarce metals and will stimulate intensive recycling well above today's levels," it said.
The findings come as metal prices surged across the board yesterday in a frenzy of buying by funds, many betting on India's housing boom and another strong year in China.
Platinum hit an all-time record of $1,060 an ounce, while copper and zinc both smashed through to fresh highs before slipping back on profit-taking. Copper is up 58pc since last May.
Silver reached a 19-year peak of $9.53 on hopes that Barclays would soon win US approval for the launch of its exchange traded fund (EFT) in silver.
The Yale findings are akin to the "peak oil" theory predicting a decline in crude output as reserves run out, but metals - unlike oil - can be recycled again and again.
Even so, the demand by Asia's sprouting cities may ex-haust reserves even if there is full recycling. The study found that 19pc of all likely zinc has been lost. Platinum is first in line for depletion. The entire global stock is just enough to sustain a 500m vehicles with fuel cells for 15 years. For copper, the total stock in use has settled at around 200kg per capita in rich countries.
"Nations such as China will need to increase their average urban per capita use by seven to eight times to achieve the same level of services. Is there enough copper to meet this?" asked the report.
New discoveries have raised the copper reserves by just 0.63pc a year since 1925 but usage has risen at 3.3pc. The scarcity has been offset until now by better technology, keeping price steady in real terms for 50 years.
This process may now be nearing its limit. Other metals can step into the breach up to a point. Aluminium, still plentiful, is already replacing copper for some electrical uses. Iron is ubiquitious.
Yale's Professor Robert Gordon, the lead author, said it was hard to see where scarce metals could be found given that mining in Antarctica is banned by treaty. "Deep-ocean mining is very hard and would disturb ecologically pristine areas," he said.
Robin Bhar, a metals analyst at UBS, said he was sceptical about the findings. "We've hardly scratched the surface of the Earth's crust. Even so, I wonder whether the prices today are signalling the risk of metals running out," he said.
By Ambrose Evans-Pritchard (Filed: 27/01/2006)
Mankind has already used up a large chunk of the metal ever likely to be found in the Earth's crust and will face a supply crunch once Asia catches up with the West, according to a new report by the US National Academy of Sciences.
The study found that 26pc of all copper ore thought to exist has already been lost, either wasted in milling, smelting and corrosion, or buried in landfills.
The report, drafted by geologists from Yale University, said there were enough ore reserves to meet immediate needs but warned of an inevitable shortage down the road.
"It is clear that scarcity value will raise the real prices of scarce metals and will stimulate intensive recycling well above today's levels," it said.
The findings come as metal prices surged across the board yesterday in a frenzy of buying by funds, many betting on India's housing boom and another strong year in China.
Platinum hit an all-time record of $1,060 an ounce, while copper and zinc both smashed through to fresh highs before slipping back on profit-taking. Copper is up 58pc since last May.
Silver reached a 19-year peak of $9.53 on hopes that Barclays would soon win US approval for the launch of its exchange traded fund (EFT) in silver.
The Yale findings are akin to the "peak oil" theory predicting a decline in crude output as reserves run out, but metals - unlike oil - can be recycled again and again.
Even so, the demand by Asia's sprouting cities may ex-haust reserves even if there is full recycling. The study found that 19pc of all likely zinc has been lost. Platinum is first in line for depletion. The entire global stock is just enough to sustain a 500m vehicles with fuel cells for 15 years. For copper, the total stock in use has settled at around 200kg per capita in rich countries.
"Nations such as China will need to increase their average urban per capita use by seven to eight times to achieve the same level of services. Is there enough copper to meet this?" asked the report.
New discoveries have raised the copper reserves by just 0.63pc a year since 1925 but usage has risen at 3.3pc. The scarcity has been offset until now by better technology, keeping price steady in real terms for 50 years.
This process may now be nearing its limit. Other metals can step into the breach up to a point. Aluminium, still plentiful, is already replacing copper for some electrical uses. Iron is ubiquitious.
Yale's Professor Robert Gordon, the lead author, said it was hard to see where scarce metals could be found given that mining in Antarctica is banned by treaty. "Deep-ocean mining is very hard and would disturb ecologically pristine areas," he said.
Robin Bhar, a metals analyst at UBS, said he was sceptical about the findings. "We've hardly scratched the surface of the Earth's crust. Even so, I wonder whether the prices today are signalling the risk of metals running out," he said.
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