High copper cathode prices have inspired a process of materials substitution that may be largely irreversible and are driving technological innovation to other materials, according to Christoph Geyer, general manager of KME Germany, one of the world's largest manufacturers of copper and brass products.

As the world price of copper has shot up by more than 400% over the last two years, demand has taken a substantial hit, Geyer tells the Metal Bulletin International Copper Conference in London. He cites International Copper Association data that copper lost 65,000 metric tons of demand to substitution in 2004 and 336,000 metric tons in 2006. There's a chance, he says, that 500,000 metric tons will be lost to substitutes this year.

Real examples of substitution already are underway even in high-tech applications that can't be replaced by other materials without significant cost disadvantages, Geyer says, pointing to automaker BMW's decision to replace 80% of copper wiring in five- and seven-seat sedans. Valient, a leading European boiler maker, has set up a small team of engineering and manufacturing experts to develop and make boilers without copper, Geyer says, noting that the firm is looking instead at steel, stainless steel, ceramics and aluminum as copper replacements within two years.

Also, innovation is swayed against copper due to the price trend, Geyer tells the meeting, pointing to research focused on aluminum to replace the red metal in solar panels. He also notes substitution is happening already in roofing materials, gutters and down pipes. But not all market observers agree. Neither do they believe the global economy, which ultimately determines copper demand, may have peaked.

"Fundamentally, there is still good demand, although maybe with a bit of a lull over the summer," says analyst Robin Bhar at UBS Securities in London. He thinks the substitution commentary may be overstated, saying the market "will bounce back again and stay strong over the course of the year and also in 2008."

Copper prices are setting records but they could cause a slide in 2008 demand.

New reports show that India may become a net importer of copper in the next three to four years because of rising demand and slow production growth, according to a senior industry official quoted by The Economic Times, an Indian newspaper.

At present, India consumes around 500,000 metric tons of copper every year but with production around 1 million tons there is a surplus of another 500,000 tons for exports. "But the situation is likely to change in the coming few years as demand is rising, but supplies are not keeping pace with it," Kishore Kumar, CEO of copper producer Sterlite Industries, tells reporters on the sidelines of an industry conference in Mumbai in June.

Kumar says the country's annual copper demand is expected to double by 2010–2012. But, with no major new projects coming up and the mining process being very slow, supply will remain static, he says.

J.P. Morgan analyst Abhay Laijawala in Mumbai agrees that Indian greenfield projects are seeing delays because of "a series of issues including land acquisition, successful rehabilitation and resettlement of the displaced and obtaining timely approvals on mining leases from the mining and environment."