The New Zealand Metal Underground: Not About Music

Something is amiss with New Zealand's manholes! Photo courtesy of "Practise" on Flickr

For a while, everyone was stealing metal in the United States. Homes left vacant by a boom-bust-building bubble were all but guaranteed to be sacked for their precious copper wiring, pipes and water heaters. Even my totally useless 1990 Geo Prizm (sic) was dragged off the streets of Chicago to have its catalytic converter ripped out and the rust repurposed (I assume anyway. Chicago cops aren’t known for solving crimes so much as beating up kids in the street. Thanks for trying though, guys).

Image from the internet. My Geo was not in nearly-as-nice shape. I imagine it is now in the shape of a cube.

And no metal has proven more tempting than sweet, sweet copper. Fargo, ND, has had two big copper thefts in the last two weeks, with some $130,000 of copper disappearing. In New Zealand (where apparently almost everything is made of copper) the situation is a near crisis.

Things that people aren’t exactly always using but which exist for posterity–I’m thinking of graves, plaques and at least one statue here–are disappearing. Worse still from a practical stand-point, manhole covers are disappearing, oddly giving credence to Murray’s concerns.

It’s an epidemic stretching all the way from Auckland to Masterton, which if you don’t know, is from here to here.

Copper is one of those commodities that acts as a worldwide bellwether of global economic health. Is it really? What can kiwis expect in the coming year? Let’s take a look at some prices, some WSJ, some Bloomberg and see, shall we?

World-wide copper prices over the last 10 years. They've dropped dramatically since their peak in February 2011.

There are mixed reports as to why copper prices are going down. I find this pretty fascinating, since it’s a tangible by-product of globalization (read: no one has any clue what’s going on). What do a euro zone crisis, a slow in Chinese building and stolen New Zealand manhole covers have to do with each other?

The rise of copper has a lot to do with China’s growth in the last decade. They are the world’s top consumer of industrial metals, and so a combination of their housing market slowing and instability in the region due to the death of one Kim Jong Il has brought the price of copper down. The Chinese economy is projected to grow only 8.5 percent next year, down from a 10.4 percent growth in 2010. This is the Chinese economy’s smallest growth in 11 years.

Even though China is the largest consumer of copper, Europe is the second biggest copper consuming region. According to the Wall Street Journal, “market participants worry that [Europe’s]  financial and economic problems will contributed to lower demand for industrial metals.” There’s no attribution in these market reports, so I can’t help but wonder which “market participants” are “worried.” As the euro slips down against the dollar, commodities–like copper–that are dominated by the dollar will become less affordable in the euro zone. The economic situation in Europe means it’s less likely that people will be building new houses anyway, but the price of copper will slip accordingly.

So there you have, New Zealand. If you don’t want to fall down a manhole, root for the euro zone to collapse.

Personally this all seems kind of ad hoc to me.

Looking at a year-long price trend it seems pretty obvious that Kim Jong Il’s death has nothing to do with copper prices, unless copper commodity traders knew about Kim Jong Il’s failing health as far back as February. It seems like you could just as easily state, “Copper prices fell because copper traders all really love and now miss Havel.” Note that there isn’t any attribution for what is causing these price shifts, just speculation. Can I hear from some commodity traders?

I went to journalism school, and I didn’t take the business reporting class, so maybe I’ve got it all wrong. Maybe there is a totally legitimate way of figuring this all out, but it isn’t as clear as, say, science reporting. It sort of makes you wonder if those Freakonomics guys are just taking broad correlations, hinting at their causality, but stopping short of actually committing to saying it out loud, so as to maintain their cred.



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