Thread by @METhompson72

#copper #tin
This thread will talk about the huge issues facing consumers from a finance perspective. This is a bigger problem than availability of metal or the price being paid.

Exponential price rises are creating huge headaches for consumers - both in terms of price paid, availability of metal and in finance. Of these finance is probably the biggest issue.

Metal supply chains have multiple points: from metal to shapes to intermediate products to final products. For example for copper consumption in an A/C unit it goes from cathode to plate and wire rod, to tube and wire, to heat exchanger and copper flex. Then final product.

The intermediate manufacturers often work on a formula where copper costs are passed straight through to the next stage, with a margin for their work added. They need working capital to fund this.

With copper prices having doubled, the working capital requirement has doubled. This is against a fixed margin business: raising this additional bank finance is VERY difficult. As is sourcing additional credit insurance on their customers.

Lending banks are also being asked to take a lot more price risk as well, due to the increase in volatility and potential to be left holding the baby if / when copper prices crash.

Normally 90% finance is available to these types of business - but this is not available with copper at $10k. I am speaking with friends at businesses having to reduce volumes due to a lack of bank lines.

This is short term #copper demand destruction driven by financing considerations. Medium term though margins will necessarily increase to a level where profitability supports bigger lending lines. This drives consumer price inflation.

This also means that pent up metal demand is now hardwired into the supply chain.