Reassuringly, there is a very strong locally based cable manufacturing industry operating in Australia. This industry has managed to serve its customers well during the pandemic being one of the industries that is seen as ‘Essential’ and therefore allowed to keep operating throughout the various lockdowns.
However, many of the materials that comprise a cable have their costs based on global indices such as copper and aluminium whose prices are determined mainly by the prices quoted on the London Metals Exchange (LME). This is something that local manufacturers have no influence over. These metals are integral parts of electrical cables for the conductors and, if fitted, the screens.
The following graphs (from the LME) show the changes in metal prices since the start of 2020:
At the start of 2020 the price of copper on the LME was around USD 6165/t, it dipped to around USD 4790 in March/April 2020 when the pandemic first took hold but has now increased to around USD 9430/t, representing an increase of 53% in only 19 months. (Source: https://www.lme.com/Metals/Non-ferrous/Copper#tabIndex=2)
Aluminium has followed a similar price trend to copper. At the start of 2020 it was priced on the LME at approximately USD 1770/t, it dipped to around USD 1450 in March/April 2020 but has now increased to USD 2490/t, an increase of 41% in only 19 months. (Source: https://www.lme.com/Metals/Non-ferrous/Aluminium#tabIndex=2)
It is quite clear that the metals price escalations shown above are well in excess of any movements one could reasonably expect from inflation alone. In this context, it is fortunate that the roughly 7% appreciation in the value of the Australian dollar vs the US dollar, over the same period, has reduced the impact of these material price movements somewhat.
While metals are a significant cost input to the full cost of manufacturing a cable, they are not the only material components that is subject to external pricing factors. For example, the insulation and sheath materials are frequently polymers that are derivatives of oil.
The graph of the Brent Crude price over the last 5 years or so shows that while the price of oil dipped significantly at the start of the pandemic, it has subsequently recovered to be very close to its recent price peaks. This in turn puts upwards price pressure on cable insulation and sheath materials. (Source: https://oilprice.com/oil-price-charts/)
Another price factor that could be overlooked is the cost of transportation, which, in Australia, is typically done via road haulage.
The graph below shows the price of Singapore diesel (which is the benchmark that determines the price of diesel in Australia) has increased from a low point in May 2020 by around 92% over the last 12 months. While the price we pay for fuel at the bowser in Australia has many cost components, this is a significant impact that cannot be overlooked.
Clearly, other factors also come into play such as the cost of utilities and labour rates. These, however, tend to be driven by more commonly understood inflationary pressures than by external pressures that see material input cost increases way beyond ‘normal’ inflation.
This is a very good and interesting article by Dr Maurizio Bragagni which explains all these points in greater detail.
As already mentioned, Australia is well served with locally-based cable manufacturers who work tirelessly to ensure customers get the very best deal and most cost-effective solutions for their critical projects.
