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1. Using demand and supply curves to show the impact of the events in the case on the price, supply and demand of copper. 2.What are the implications of these trends for managerial decision making?

1. Using demand and supply curves to show the impact of the events in the case on the price, supply and demand of copper. 2.What are the implications of these trends for managerial decision making?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. Using demand and supply curves to show the impact of the events in the case on the price, supply and demand of copper. 2.What are the implications of these trends for managerial decision making?
5:46 X ← Managerial Econ... Copper Surplus Is Foreseen in '07 by Allen Sykora Wall Street Journal, February 28, 2007 Copyright © 2007 Dow Jones & Co. Reprinted by permission of Dow Jones & Co. via Copyright Clearance Center. A number of analysts are looking for the global copper market to have a surplus this year, citing an expectation for steadier production after a strike-filled 2006 and potential substitution for the mineral.... Data for 2006 from the International Copper Study Group suggest the market already has moved into a small surplus. The group lists a surplus of 108,000 tons for the first 11 months of 2006, compared with a 263,000 deficit for the same period in 2005.... Chuck Bradford, metals analyst with Soleil Securities, looks for a surplus in the 200,000-ton area. "One of the interesting things in the International Copper Study Group piece [of Feb. 16] was a rebound in the operating rate at the mine level," Mr. Bradford said. "If you look at the operating rates in earlier '06, they were well below where they had been any time during the rest of the decade.... Production was lost during much of 2006 due to a series of strikes, Mr. Bradford said. The ICSG report said global mine output was up 3% in November compared with the same month in 2005. But production disruptions in the first part of the year left output for the first 11 months of 2006 essentially unchanged-up 0.1% compared with the same period in 2005. Mr. Bradford said he doesn't anticipate a "huge" copper surplus in 2007, "because I think we'll have strikes again." Also, he said, when prices are high, companies are willing to mine lower-grade material that they may have not otherwise.... Michael Skinner, of base metals sales with Standard Bank, said his firm looks for a modest surplus this year, assuming there is a "constant stream of production" without as many labor disruptions as in 2006.... "It mainly has to do with continuity of production this year," he said. "There is certainly incentive to do that at these prices. That will help take us into surplus." Mr. Skinner cautioned there can be wide variations in the supply-and-demand estimates by various researchers. This is especially the case for copper due to the difficulty in obtaining data from China. Mr. Skinner said while the ICSG put the surplus at 108,000 metric tons for the first 11 months of 2006, his firm estimated a surplus of 40,000 metric tons in all of 2006.... Mr. Bradford said a measure of demand may be how much substitution for copper occurs due to historically strong prices. "My biggest fear is substitution," he said. "I keep asking people about it, and I get very conflicting stories. The alu- minum guys are all convinced they have benefited materially from substitution away from copper into aluminum. "[Copper] has been losing markets because of the price. It just takes a long time for that to happen," Mr. Bradford said. An example, he said, is the move toward plastic piping in home construction. Mr. Skinner also said industry appears to be making some effort to find substitutions for copper. He said his firm believes the economy won't slow as much as some have forecast. If demand in other parts of the world holds up, overall demand could increase "marginally" this year, he said. The key may be the level of Chinese imports, he said. "The market is looking at that very carefully. The scrap substitution is also a key," Mr. Skinner said. While many analysts look for Chinese buying to pick up this year, some caution it may not be as aggressive as some expect. In particular, many suspect China has drawn down inventories that must now be rebuilt.... = ||| ୦ 3 ll 24%.
Transcribed Image Text:5:46 X ← Managerial Econ... Copper Surplus Is Foreseen in '07 by Allen Sykora Wall Street Journal, February 28, 2007 Copyright © 2007 Dow Jones & Co. Reprinted by permission of Dow Jones & Co. via Copyright Clearance Center. A number of analysts are looking for the global copper market to have a surplus this year, citing an expectation for steadier production after a strike-filled 2006 and potential substitution for the mineral.... Data for 2006 from the International Copper Study Group suggest the market already has moved into a small surplus. The group lists a surplus of 108,000 tons for the first 11 months of 2006, compared with a 263,000 deficit for the same period in 2005.... Chuck Bradford, metals analyst with Soleil Securities, looks for a surplus in the 200,000-ton area. "One of the interesting things in the International Copper Study Group piece [of Feb. 16] was a rebound in the operating rate at the mine level," Mr. Bradford said. "If you look at the operating rates in earlier '06, they were well below where they had been any time during the rest of the decade.... Production was lost during much of 2006 due to a series of strikes, Mr. Bradford said. The ICSG report said global mine output was up 3% in November compared with the same month in 2005. But production disruptions in the first part of the year left output for the first 11 months of 2006 essentially unchanged-up 0.1% compared with the same period in 2005. Mr. Bradford said he doesn't anticipate a "huge" copper surplus in 2007, "because I think we'll have strikes again." Also, he said, when prices are high, companies are willing to mine lower-grade material that they may have not otherwise.... Michael Skinner, of base metals sales with Standard Bank, said his firm looks for a modest surplus this year, assuming there is a "constant stream of production" without as many labor disruptions as in 2006.... "It mainly has to do with continuity of production this year," he said. "There is certainly incentive to do that at these prices. That will help take us into surplus." Mr. Skinner cautioned there can be wide variations in the supply-and-demand estimates by various researchers. This is especially the case for copper due to the difficulty in obtaining data from China. Mr. Skinner said while the ICSG put the surplus at 108,000 metric tons for the first 11 months of 2006, his firm estimated a surplus of 40,000 metric tons in all of 2006.... Mr. Bradford said a measure of demand may be how much substitution for copper occurs due to historically strong prices. "My biggest fear is substitution," he said. "I keep asking people about it, and I get very conflicting stories. The alu- minum guys are all convinced they have benefited materially from substitution away from copper into aluminum. "[Copper] has been losing markets because of the price. It just takes a long time for that to happen," Mr. Bradford said. An example, he said, is the move toward plastic piping in home construction. Mr. Skinner also said industry appears to be making some effort to find substitutions for copper. He said his firm believes the economy won't slow as much as some have forecast. If demand in other parts of the world holds up, overall demand could increase "marginally" this year, he said. The key may be the level of Chinese imports, he said. "The market is looking at that very carefully. The scrap substitution is also a key," Mr. Skinner said. While many analysts look for Chinese buying to pick up this year, some caution it may not be as aggressive as some expect. In particular, many suspect China has drawn down inventories that must now be rebuilt.... = ||| ୦ 3 ll 24%.
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