Neat graphs, underlying patterns: updating ‘Assets Under Attack’ to address the ‘double-hump’ in metal theft
May 18, 2012 Leave a comment
Earlier this month I was invited to join a Canadian radio debate on CBC’s current affairs programme, The Current. I was to speak on the ‘international’ dimension of metal theft: both in terms of causes and policy responses around the world. My contribution would have drawn on my 2008 article Assets under attack: the dark side of the global recycling market (Bennett 2008a & b), but the feature was curtailed at the last minute, my international contribution axed and I was stood down, unneeded.
But the invitation had got me looking back at the ‘state of the world’ picture presented in my 2008 article and starting to update it. So, here I present some sketched findings – by way of an update to that 2008 picture.
Shortly after my original paper was published the world hit the September 2008 financial crisis. The World economy faltered and metal prices (along with most other indices of economic health) took a tumble. It seemed that the metal price bubble had burst. I thus turned my attention to other projects, until last Autumn’s public furore about brass plaque thefts from war memorials here in the UK attracted my attention back to metal theft as an intriguing (and objectionable) phenomenon.
They say a picture’s worth a thousand words – and in the case of metal theft this is particularly true. Here’s a graph from the London Metal Exchange showing the cash buyer price for copper between January 2004 and May 2012. The price is US$ per tonne.
[Graph from LME 2012]
The bubble I was writing about in early 2008 is the first three-peak mountain. The dip is the ‘credit crunch’. The (even higher) peak to the right is the current bubble. And it’s even higher than the (then) ‘highest ever’ that I was writing about in 2008.
The 2004-2012 fortunes, need to be seen in a longer-term context. Here, spread over a 20 year period the ‘hike’ of the past six years is even more marked.
[Graph from Quercia 2011]
Or, for those who are less pictorially inclined, here’s another way of presenting the message: since 2001 the price of copper has increased 500%.
My article addressed both copper and lead. If we look at the fate of the cash buyer price for lead we see a similar (but not identical) ‘double-hump’ for the same period. The difference is that the post-2008 recovery for lead is less aggressive (but still remarkably buoyant at a time of supposed once-in-a-lifetime World economic woes).
[Graph from LME 2012]
And what of the correlation of price to metal theft levels as glimpsed via consequent insurance claims resulting from it? Well, again the picture can do the talking here too (the data is from Ecclesiastical, the UK’s main insurer of church premises):
What I think we see in the 2007-08 phase is a clear correlation between the lead market price and the rate of claims. But after 2008 the relationship is less clearly aligned – possibly indicating that either church security measures are now more effective and/or that the lower recovery of lead prices (compared to the recovery for copper) makes copper a more attractive element to target: that lead theft is becoming relatively less attractive. Alternatively it might indicate that insurers are better able to deter claims from victims of metal theft. Remember here that lead theft is focussed towards a more specific set of targets: primarily churches and schools, premises which are owned by relatively sophisticated and co-ordinated institutions, and served by a small number of ‘public sector’ focussed insurers.
But copper is far more ubiquitous as a building element – found (almost) everywhere as pipes and cabling. High profile campaigns have alerted the public (and legislators) to the infrastructural impact on the railways and power distribution networks, but even with these assets now (relatively speaking) better protected, there are still plenty of other ‘easy’ targets for mundane (but dangerous) copper theft.
A graph considering the claims/price relationship for copper for the post 2008 hump has recently been issued based on National Insurance Claims Fraud Bureau data on US copper theft related insurance claims.
If we take insurance claims as a proxy for levels of copper theft from the built environment, a steady rise in claims, would suggest an underlying rise in metal theft (reflecting a price/crime relationship).
In my 2008 Article I explored the contribution of Chinese demand to driving the 2006-08 price hump (particularly as regards copper). I also highlighted the role of the rising automotive market in the Indian sub-continent (lead being needed for car batteries). So, do these influences stand post-2008?
There is still little in the way of academic analysis devoted to this or any other aspect of the metal theft phenomenon. But an interim report in November 2011 by Pol-Primett, Metal theft: An emerging threat to Europe’s economic security? (Quercia 2012) helpfully draws together some of the available economic data on the state of the world copper supply market.
The world copper price reflects changes in the world economy – but also events and pressures within the copper industry itself. Thus the 2010 price spike was at least in part due to the effects of the Chilean earthquake in February 2010 and its disruption of copper mining in that region. For these reasons the future fate of copper prices is difficult to predict. But these factors (the world-economy generic and the copper industry specific) rejoin in the interaction of project finance markets, confidence to develop new extractive capacity and prospects of production expansion. With the finance markets drying up, it has become harder to bring more productive capacity on stream. Thus world copper mining production capacity was forecast to grow no more than 3% in 2011. Quoting from the International Copper Study Group (ICSG) Global Copper Scrap Report 2010 the Pol-Primett report also notes that:
“The discovery rate of large copper mines as Oyu Tolgoi in Mongolia (300 kt-cu per year of mine capacity at least) is falling and the expected contributions of mine capacity expansions are expected mainly in small and not in big mines in production.” (14)
This should be contrasted with the relatively subdued world price of copper sustained during the period 1966 to 2004, which has been attributed by a number of studies to excessive global copper supply (in relation demand) due to vigorous expansion of copper mine capacity during that period.
In short, there is not much scope for a dramatic increase in global copper production for the foreseeable future, therefore copper prices are likely to remain high. And nothing has changed to alter the sobering quote, used in Assets Under Attack, that Chinese demand can but rise – for “currently the US consumes 50 pounds of copper per capita each year, while China is using only one pound.” (Goldworld, 2008)
This prediction of an ongoing contribution of Chinese developmental demand is backed by Egbert Tölle’s report for the European Commission on Natural resources, secondary raw materials and waste (Tölle 2007). The economic boom in China explains a third of the worldwide increase in the demand for raw materials. For example that China’s metal commodities imports have multiplied by a factor of 4 to 10 over the past decade”. And the world supply situation, according to Tölle, is further exacerbated by the fact that China restricts the export of raw materials, including taxes between 10 and 15 percent on the export of copper of various forms.
It is perhaps not surprising, given that China’s demand is 1 million tonnes greater than its home-produced copper supply, that it would seek to keep as much of that indigenous copper as possible, in order to meet the need for – in particular – a rapidly increasing demand for automotive, electronic goods, and electrical wiring.
The net result of the world suddenly finding itself with a supply/demand imbalance and the resurgence of world copper prices not seen since the early 1960s, is that the shortfall in ‘virgin’ copper triggered an increased focus upon secondary sources – i.e. recycling copper already in the man-made environment. This, in turn, has triggered criminals to pillage copper, and other metals, from the built environment before they have actually reached the end of their current working life.
My concern here is with metal prices and their relationship to metal theft. But it is interesting appreciate that many commodities are also soaring in price. The following graph caught my attention in this regard:
Looking at this graph I was tempted to add a flippant comment to the effect that “it helps explain why we are not seeing a wave of cattle rustling”, but a few moments thought reminded me that actually we have seen a resurgence of rustling in recent years. In the UK theft of sheep are – apparently – on the increase. An article in the Daily Mirror reported that 30,000 sheep had been stolen in the UK in the first eight months of 2011, at an estimated cost of £5 Million (White 2011). The logistics of stealing a herd of sheep implies that this is not an opportunistic crime, but rather one of relatively sophisticated gangs, aware of the value of these assets as commodities, and having confidence in an ability to integrate these ‘raw materials’ back into the legitimate consumption chain via willing production interfaces (in the case of sheep: abattoirs, in the case of metal theft: scrap yards). The inherent ‘rationality’ is attested to by an NFU Mutual representative interviewed by the Daily Mirror, who characterised the evolution of ‘stealing from farms’ thus:
“In the last decade, livestock rustling has been at historically low levels, while farm thieves concentrated on stealing quad bikes, tractors and power tools. High meat prices and improved security appear to be leading to a resurgence in livestock rustling.”
Crimes like metal theft (and sheep rustling) are anomalous. They lack the ‘glamour’ of what we might think of traditionally as either ‘organised’ crime or ‘international’ crime, yet they are show by the above to be very much a reflection of truly global systems, and whilst each event of theft may be localized in its event-space, and low value in terms of the assets taken, aggregated to national and international level (and having regard to the disproportionate cost caused by damage and disruption to infrastructure in the case of metal theft) they are truly significant, for metal theft is now estimated to cost the UK a staggering £770million p.a. (HoC 2012).
By background and inclination I’m a qualitative researcher. This means that I prefer the realm of words, to that of numbers. But I find that I am in awe of the graphical presentation of these statistics. I can understand a picture better than a calculation of standard deviation or some other numerical way of portraying what the graph effortlessly shows me. I also have a healthy distrust for any situation that claims to portray reality neatly. My research training told me that most cause and effect relationships I would ever encounter in social research would be spurious. Social reality is too complex (and messy) to capture in numbers and on charts. So, looking at the graphs presented here I find myself captivated by their neatness, the closeness of the correlation between apparent ‘causes’ and ‘effects’. I know these parallel lines don’t prove causation – but in my gut it all feels incontrovertible. Early on in Assets Under Attack I quoted The British Transport Police’s Deputy Chief Constable, who interviewed in The Guardian in May 2007 had stated:
“You have only got to look at the rising copper price on the metal market and the theft of copper matches that rise almost entirely.”
It still seems too neat – but nothing I’ve found contradicts this ‘common sense’ reaction to the data. But, I’m not a statistician or an empirical criminologist (I’m just an environmental lawyer cum urban geographer cum many other things). So, it was reassuring to see the appearance of a ‘proper’ study by some statistically inclined quantitative researchers at the Jill Dando Institute of Crime Science, at University College, London. In their study of the relationship between levels of railway cable theft and copper price movements, Sidebottom et al (2011) found a sober, statistically reliable, correlation between these two variables. So, there is now sound ‘science’ confirming what the more qualitatively inclined have ‘felt’ all along. The correspondence between theft and price is genuine.
And armed with that correlation, we can shed interpretative light on the risky human reality of the local events of plunder. For it, for example, helps to explain why a scavenger stands hacking at a section of railway signalling cable, risking his life and the comfort of many thousands travelling on the line, somewhere in remote barren depths of South Yorkshire. It can explain an individual’s actions by reference to sweeping abstract global forces and materialities, expressed through the lure of turning copper into cash in a black economy transaction later that evening. Not many areas of research into the built environment require such lurches of scale in the interpretative process.
Bennett, L. (2008a) ‘Assets Under Attack: metal theft, the built environment and the dark side of the global recycling market’, Environmental Law & Management, 20 (4), 176-188. Available at: http://shura.shu.ac.uk/683/
Bennett, L. (2008b) ‘Metal theft – anatomy of a resource crime’ (unpublished) companion paper to ‘Assets Under Attack’. Available at http://shura.shu.ac.uk/4125/
Goldworld (2008) Copper fundamentals still bullish – an investment report, at www.goldworld.com
HoC (2012) Metal Theft – Commons Library Note, House of Commons: London http://www.parliament.uk/briefing-papers/SN06150
LME (2012) London Metals Exchange website: http://www.lme.com/non-ferrous/index.asp
Quercia, P. et al (2011) Metal theft: An emerging threat to Europe’s economic security? Pol-Primett: http://www.agenforitalia.it/index.php?option=com_content&view=article&id=28:pol-primett&catid=2:projects
Tölle, E. (2007) Ad hoc group 10 Natural resources, secondary raw materials and waste, European Commission, Enterprise http://ec.europa.eu/enterprise/policies/sustainable-business/files/environment/hlg/june_07/e_toelle_en.pdf
Sidebottom, A. et al (2011) ‘Theft in Price-Volatile Markets: On the relationship between copper price and copper theft’ Journal of Research in Crime and Delinquency, 48 (3), 396-418.
White, S. (2011) ‘Dramatic rise in sheep rustling costing farmers £5million a year’, The Daily Mirror, 3 October http://www.mirror.co.uk/news/weird-news/dramatic-rise-in-sheep-rustling-costing-82837