Metals: Copper's Problem

War gobbles copper, and so does prosperity. In the U.S., 13% of copper production is now reserved for Viet Nam military needs. At the same time, demand for color TV sets, appliances and cars has helped boost consumption 17% this year to a rate of 2,344,000 tons, nearly half of the metal's world output. With Europe and Japan also using more copper, the extra demand has come too fast to be met by producers plagued by strikes in Chile and by tensions between white Rhodesia and black Zambia.

The result is a world copper shortage and strong upward push on prices. Earlier this year the price rose to a breath taking 98¾¢ a lb. on the London Metal Exchange, a small-volume speculative market to which users turn when regular sources fail. In April, Chile, unable to resist temptation, broke a producers' agreement that had pegged the price at 42¢ a lb., went up to 62¢. Zambia then decided to sell at L.M.E. prices, now 72¢, and Peru-based companies followed suit. Last week Chile again hiked its price, this time to 70¢. In the U.S., the Administration has held the price at 36¢ by a combination of presidential arm-twisting, massive releases from Government stockpiles, subsidies to mining companies, and a virtual ban on exports.

The shortage will probably get worse before it gets better. Among other things, Zambia's political decision to stop shipping copper through Rhodesia creates a bottleneck that may by year's end leave 150,000 tons of Zambian copper awaiting transport. To copper producers, the great danger is that higher prices and uncertain supplies may cause copper users to switch rather than fight.

Some big customers are already looking for ways to cut copper requirements.

This week copper company representatives from Chile, Peru, Zambia and the Congo are meeting in Lubumbashi, formerly Elisabethville, to consider the situation. But despite the danger to copper, prospects for an early return to the old pegged prices are slim.