Attention
has been drawn to this ever since the movie Collapse came out. I'm
sure this is widespread in New Zealand – it simply isn't being
reported.
Copper
theft: a worldwide, and sometimes lethal, epidemic
29
March, 2013
Note:
column height indicates the number of hits produced when performing a
news search for the term “copper theft." Source: Factiva.
What
killed Thelma Morrow?
At
first glance, the answer seems obvious and not all that unusual. On
the night of September 7, 2011, a carstruck the
52-year old Miami woman as she crossed the road.
It’s
tragic, but pedestrian-car accidents happen all the time.
Yet
something about Morrow’s death was different, and it had nothing to
do with Morrow, the driver, or weather conditions.
As
a local news outlet reported at
the time, “A 30-block stretch of road was unlit because copper
wiring had been stolen from the street lights, rendering them
inoperable.”
Emergency
personnel at the scene were convinced the dimly-lit street made the
unfortunate difference.
“We
all feel if the street lights were on, she wouldn’t be fighting for
her life,” an official with the Miami Fire Rescue was quoted
as saying.
Thelma
Morrow was killed by copper theft.
The
epidemic
Whoever
stole the copper wiring that led to the death of a Miami woman is not
alone. Over the last several years, the number of copper thefts has
exploded.
Thieves
have targeted countless items containing the metal: air conditioners,
bronze statues, and wire from railway lines. A favourite among
criminals are empty, foreclosed homes in the post-housing meltdown
U.S. Unlike common burglars, they do not look for cash, jewellery or
electronics: they break and enter because the average single-family
home contains over
400 pounds of
copper, according to the Copper Development Association, an
industry-supported group.
The
looters risk, and sometimes lose their lives in the course of heists:
many have been electrocuted, often after cutting live cables in
electrical substations. And, as the Morrow case illustrates, they
often endanger others as well. According to
the FBI:
Copper thieves are threatening US critical infrastructure by targeting electrical sub-stations, cellular towers, telephone land lines, railroads, water wells, construction sites, and vacant homes for lucrative profits. The theft of copper from these targets disrupts the flow of electricity, telecommunications, transportation, water supply, heating, and security and emergency services and presents a risk to both public safety and national security.
It’s
a worldwide phenomenon: in Britain, police warned in
February 2011 that, “cable theft [was] the next biggest priority
after the terrorist threat.”
Canada
hasn’t been spared either. Back in 2008, Toronto Police had
a dedicated
cop on
the copper theft beat. Calgary recently established its own special
unit to combat the problem. Last year, 7 people were
arrested after
allegedly stealing copper from a Hydro-One facility in Etobicoke.
They were lucky: in anotheralleged
attempt to
steal copper from a Hydro-Quebec property a man lost his life in
2011.
The
culprit, part 1
The
reason for these brazen thefts is rather simple: price.
As
the following chart indicates, the price of copper started climbing
in the early 2000s and has been at unprecedented heights ever since.
It’s a fantastic opportunity for a thief: all you have to do is
steal the stuff and sell it to a scrap metal dealer — and because
it’s very difficult to prove which scrap was legally obtained and
which was stolen, you really have to be busted in the act in order to
get into trouble.
But
why are copper prices so high?
The
standard answer goes as follows: copper prices are high because
fast-growing emerging economies, especially China and India, need
lots of it to build infrastructure. They’ve pushed world demand
higher and prices have followed.
Copper
theft in places like the U.S. and Canada, then, would seem to be a
bizarre side-effect of economic development in far-flung corners of
the world.
In
other words, Toronto Police can put a dedicated cop on the copper
theft beat for a couple years, as they did, but they’re really
playing a metallic version of whack-a-mole. It is eminently futile.
As long as the price is high, there will be motivated thieves.
The
culprit, part 2
Last
May, Maclean’s published
a Bank of Canada memo on
speculation in commodities obtained under Access to Information
legislation. According to that document,
“In
December 2010, the [London Metals Exchange] reported that a single
trader held up to 90% of the metal in LME warehouses, a position
worth about 3bln and equal to about 50% of the exchange-registered
supply of copper in the world…Copper traded to what at the time was
record highs.”
The
Bank of Canada’s analyst was right, but story is more complicated
still.
Huge
amounts of copper have been
flowing into China for years, but there’s mounting evidence that a
significant part of it isn’t going into building infrastructure —
it’s merely stockpiled. It’s hard to come up with precise
estimates of exactly how much copper lies piled up in China but we
have some hints, provided by intrepid financial analysts who’ve
taken to traveling the country taking pictures of the stocked-up
metal.One
photo,
taken by Standard Chartered and first noted by FT
Alphaville,
shows copper being stored in a parking lot because the warehouse was
filled to the brim:
And
these hoards aren’t showing up in most published estimates of
worldwide inventories, the kind of statistics the Bank of Canada was
looking into at the London Metals Exchange and that analysts use to
gauge how much of a supply buffer exists for industrial metals.
If
all you looked at was the LME stockpile, copper supply would indeed
appear reasonably tight: inventories have climbed significantly as of
late but still only total about 500,000 tonnes, compared to annual
estimated demand of over 18 million tonnes. However, as the
BBC revealed a
couple of years ago, there are also large tonnages of copper that are
stored in LME-approved warehouses but
not reported to
the exchange. Second, almost all of the metal being stored in China
is not captured in the data on worldwide inventories.
According
to regulatory
filings by
investment bank JP Morgan and Blackrock, the world’s largest money
manager, there are between 2.5 and 2.8 million tonnes of copper held
outside the LME warehouse system. These estimates of so-called
“hidden stocks” suggest the market is very well-supplied,
contrary to conventional wisdom.
In
China, some reports indicate that local firms who cannot get
conventional loans from banks are able to import copper and use the
collateral as proceeds in order to borrow. Other
observers suggest certain
market players are squirreling away inventory to keep the market
tight.
The
market may soon be subject to yet more stockpiling: JP Morgan and
Blackrock, for their part, have proposed two copper Exchange Traded
Funds, securities whose sole purpose would be to buy and store
physical copper for investment purposes.
Regardless
of where exactly the metal is being stashed away and who is behind
it, this much seems clear: the reason why Thelma Morrow died isn’t
a worldwide shortage of copper — it’s a massive amount of
hoarding. And until it stops, the theft will go on.
This is very nice post thanks for sharing this and keep sharing this type of informational blogs.
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