The List: Rising China, Hidden Costs

Source: London Metal Exchange

Copper

Primary uses: In pipes and electrical wiring in buildings

Trends: Copper is tops. Prices of red gold are down from their May 2006 high of $4 per pound, but overall, theyve gone up four-fold in the past five years. And Chinas reemergence into world copper markets after a year of drawing down inventories means that high prices are here to stay despite a U.S. housing slump. China consumed 20 percent of world copper production in 2006, and that number will likely rise in coming years as new factory projects come online.

Hidden costs: Millions of dollars in scrap metal thefts. In the United States and Europe, thieves have stolen copper from tubing in houses, priceless bronze sculptures, and even live electrical wires. State governments are scrambling to impose new regulations on scrap metal dealers to verify they arent buying stolen goods.

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Nickel

Primary uses: In stainless steel and other alloys, as well as in batteries

Trends: This is nickels big year. As countries become wealthier, they tend to consume more stainless steel, and China is no different. Despite a recent mini-slump due to concerns about Chinese demand, nickel was way, way up over the past year, reaching a high of over $42,000 per tonne in the last week of February 2007. The market expects nickel prices to decline as Chinas growth cools somewhat this year, but they likely wont fall too far.

Hidden costs: A nickel isnt worth five cents anymore. The U.S. government banned the melting down or exporting of pennies and nickels in 2006, as the value of the copper and nickel in them had increased beyond their face value. With copper still expensive and nickel soaring, the U.S. Mint is now losing over $40 million a year. Japan, meanwhile, has seen an increase in thefts of stainless steel from items like car barriers, incense holders, and slides in childrens parks.

And its not just copper and nickel: Manhole covers and sewer grates have been disappearing around the world due to rising prices for scrap iron. Catalytic converters have become another popular target of thieves due to the resale value of the platinum, rhodium, and palladium they contain. Even aluminum siding has begun disappearing from houses across the United States.

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Timber

Primary uses: In construction, furniture, plywood, paper, and other wood products for domestic use and export

Trends: Chinas becoming the worlds wood shop. China has become a major exporter of finished wood products such as hardwood floors and plywood. China imported $3.9 billion worth of timber logs in 2006, up 9.5 percent from 2005.

Hidden costs: In this case, the costs are in plain sight: Struggling to regrow vast swathes of its own decimated forests, China is moving on to the rest of the world. China is by the far the worlds largest importer of tropical wood, and its appetite for timber is wreaking havoc on fragile ecosystems in Gabon, Malaysia, Congo, Indonesia, Papua New Guinea, and Burma, while spawning powerful timber smuggling networks. Russias pristine boreal forests are now being illegally clear cut, largely for the Chinese market. But dont blame China alone: It exported $8.78 billion worth of wooden furniture in 2006, with $4.17 billion of that going to the United States.

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Ivory

Primary uses: In jewelry and for ceremonial seals or stamps

Trends: China is the largest ivory market in the world, and its growing. The countrys rising urban middle class, flush with cash and eager to purchase markers of prestige, has joined with Japanese consumers to drive ivory prices in Asia to over $750 per kilogram in 2006.

Hidden costs: Dead elephants. Despite a 1989 ban on international sales of ivory, African elephants are being decimated by poachers eager to cash in on sky-high prices. An estimated 23,000 elephants were killed illegally in 2006 alone, or around one in 12 of the entire African pachyderm population outside of Botswana (where the animals are well protected).

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Soybeans

Primary uses: In tofu, soy sauce, and vegetable oil, as well as in livestock and aquaculture feed

Trends: Soaring soy. The U.S. Department of Agriculture (USDA) expects China to account for 78 percent of world growth in soybean imports over the next decade. The main beneficiary? Brazil. Booming demand for corn-based ethanol in the United States is causing U.S. farmers to shift away from soybeans, providing an opening their Brazilian counterparts are all too happy to fill. Already the worlds number one exporter of soybeans and soybean products, the country is expected to increase its acreage planted with soybeans by 4 percent per year.

Hidden costs: Deforestation. Though it has fallen from a 2004 peak, Brazils Amazon rainforest is still disappearing at an alarming rate. At least 15 percent of the forest has been destroyed over the past 40 years. Although the leading cause of that deforestation has been cattle ranching, soybeans are a growing culprit; the rate of deforestation in the Brazilian state of Mato Grosso, for instance, closely follows the price of soybeans. Given the USDAs projected growth numbers for soybeans, that means trouble for the Amazon.

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