Total World Trade in All Insulated Wire and Cable Types

Monthly Analysis to September 2011 

CRU’s most recent analysis focuses on monthly data for the year to September 2011 with comparisons against previous years. Up until May, world insulated wire and cable trade volumes had been showing significant year-on-year growth with exports rising by 14% in March, 5% in April and 7% in May, compared to the prior year month. However, world exports in June were down 4% year-on-year against the peak month for trade volumes in 2010. Data for July indicated a 2% year-on-year decline, again versus a fairly strong trading month in 2010. Subsequent data, which is of a more provisional nature with a greater use of estimates and less reported data encouragingly suggests that trade flows in August were much stronger than the very soft month a year-ago. World exports rose 5% year-on-year in August while September volumes rose 1% year-on-year and displayed the usual seasonal sequential strengthening pattern.

Our Interpretation of the Trends...

Our reading of the data suggests that the slight year-on-year deterioration in June and July 2011 amount to no more than the briefest period of market softening. In 2010, the summer peak came later in June as firms placed higher orders ahead of the longer holiday shutdowns that were already planned for August. In 2011, the summer peak came earlier in May after a very strong first quarter. August was much more of a “normal” trading month, while September saw the usual encouraging sequential monthly improvement. In many respects it is this September seasonal jump (+5.4% from August 2011) that is the most important market signal. It breaks the three month sequential downtrend since May and demonstrates that the third quarter as a whole was not especially “weak” compared to 2010. Moreover, it should signify confidence that the fourth quarter of 2011 should also follow the usual seasonal pattern of steady, but moderately declining trade volumes through to the end of December.

...this is supported by Wire & Cable Shipments in Several Nations

As is well known, the global wire and cable industry is not blessed with being well documented with publicly available country or association industry statistics or data, especially on a monthly basis. Excellent and comprehensive industry statistics are published on a monthly basis in Japan (by both the JCMA and MITI). Government data on wire and cable production volumes is also published in Taiwan and China but both are known to be not fully comprehensive in terms of company coverage. And, as everyone knows, any statistics which relate to China have to be treated with some caution as collection and reporting methods are suspect and variable!

The evidence from these independent statistical sources Ð albeit some time in arrears - is also supportive of the view that while production growth has slowed it has not gone into decline. Growth rates are also encouraging for India and Brazil where CRU’s expects to see a 9-10% increase in each market for full year 2011. The situation in China is a little more mixed but still healthy, with around a 5% increase in wire and cable market volumes predicted for this year. The market in the GCC states is also improving compared to 2010 but the exact outcome is harder to quantify at between 7-9%. Anecdotally, we also hear good reports from Russia which is visible to us from our tracking of the Russian copper wirerod business. So, as a group, the industrialising economies that account for roughly two-thirds of world metallic cable output continue to enjoy healthy growth rates.

But what of the Industrialised World?

In Japan, September shipment volumes of wire and cable fell 1.6% from year-earlier to 59,500 tonnes conductor weight according to preliminary data from the Japan Electric Wire and Cable Makers’ Association. However the revised August figure of 53,895 tonnes conductor showed a 1.7% year-on-year increase. Demand for automotive wiring harness and winding wire is recovering sequentially as vehicle assembly schedules ramp up. Building wire volumes to distributors and construction companies are stable, but power cable shipments have slumped since June as utilities have slashed capital spending since the halt to operations at nuclear power plants has inflated running costs. The JCMA is forecasting a 2.2% year-on-year fall in shipment volumes to 694,200 tonnes in the fiscal year to March 2012 from 709,813 tonnes in the previous fiscal year. Domestic fibre optic cable consumption is expected to drop by 16% from 9.2m fkm to 7.7m fkm. However, exports of fibre optic cable, optical fibre and performs have risen significantly to compensate, such has been the strength of demand from China.

Elsewhere in North East Asia it is a similar story of mixed, but not bad, market conditions. Total Taiwanese metallic wire and cable production in August 2011 was absolutely flat year-on-year. Within this total in August enamelled wire output slumped 19% year-on-year and production of all building wire and power cable fell 7%. However, offsetting this was a 10% year-on-year rise in electronic wire, a 13% increase in copper communication cables and a 67% surge in the production of other metallic wire and cable. Meanwhile fibre optic cable shipments fell 1% compared to a year earlier. It is a similar situation in South Korea where after strong year-on-year increase in cable production in the first quarter, the second and third quarters have merely tracked year-ago volumes. Automotive wiring harnesses and winding wire for auto electrical motors are the strongest areas due to a 9% increase in vehicle output in the year to October, mainly for export. Exports of wire and cable are the next best performer and they are predicted to grow by 6% in 2011.

Slow Speed Ahead in NAFTA

In North America (Canada, United States and Mexico) CRU expects that 2011 will turn out to be an anaemic year for growth. We are expecting growth of only 0.8% in metallic cable consumption volumes, with Canada being the only market to show any reasonable level of growth, at 3.3%. The only really strong market segment is (like South Korea) wire and cable for the automotive industry (primarily wiring harnesses and electric motor windings). Total NAFTA vehicle output rose 8.9% year-on-year to 11.2 million units in the period January to October 2011. Within this total automobile output rose 6.9% year-on-year; light truck shipments 8.7% and medium and heavy trucks an immense 57.0%. Large windings for transformers and other heavy electrical equipment are the only other sizeable market segment to show any strong growth trend. Encore Wire recently reported a 9.4% rise in its building wire volumes for the nine months to the end of September, however, its Q3 shipments rose only 2.3% year-on-year. Meanwhile General Cable reported that its North America operations experienced a 4% year-on-year fall in their shipment volumes in Q3 2011. Nexans’ results for their combined North and South American regions was an 8.7% year-on-year increase for the nine months to September 2011, measured at constant metal prices. However, Q3 sales only achieved a 0.8% year-on-year rise measured on this basis.

Encouraging Q3 European Results

Nexans, Prysmian, General Cable and Leoni have recently reported their Q3 2011 financial results, which together reveal a good description of European market trends. Nexans reported a 7.8% year-on-year increase in their Q1-Q3 European sales, measured at constant metal prices, however the pace of year-on-year growth had slowed to 2.9% by Q3. But the group reported healthy conditions across its energy infrastructure, renewable, industrial speciality cables, automotive, transport and natural resources end use market segments. Building wire sales were more mixed according to geography.

Prysmian has also just announced its financial results in the past few days. It too paints a generally robust view of the market, from what is now the leading player. Nine month organic growth for the new Prysmian Group (including Draka retrospectively) was 9.9% globally, though Europe is its centre of activities. Growth in the Energy Cables and Systems business unit was 9.0% while the Utilities segment was even stronger at 18.7% due to a strong recovery across all business lines. Sales to Trade and Installers remain weak however with only a 0.2% rise for Q1-Q3. Revenues from Industrial customers advanced by 9.4% while the Telecom Cables and Systems unit posted organic growth of 13.8%. These results are very encouraging, but also highlight that “global demand has been largely driven by growth in emerging markets, while the European market continues to be weak”.

General Cable also acknowledged “continuing weak conditions in Europe” in its Q3 financial summary. Nevertheless it did achieve a 13.0% year-on-year increase in metal adjusted revenues for its European and Mediterranean regional segment and a 5.8% rise in metal pounds shipped. But by far the most bullish set of results has come from Leoni. It has been experiencing “unabatedly heavy demand from the automotive and capital goods industries”. September 2011 was the single highest sales month in the Group’s history. Euro denominated sales of wiring harnesses have surged by 28% year-on-year in Q1-Q3 2011, while its wire and cable revenues have leapt by 33%. CRU is forecasting a modest 3.1% rise in total Western European metallic cable consumption in 2011 to 2.1 million tonnes conductor weight. We here more encouraging news from Eastern Europe and Russia where we expect regional consumption growth to be 8.5% in 2011.