Conclusions

In the past five years prices for copper, and to a lesser extent for aluminium, showed more volatility than previous periods, excluding the global financial crisis of 2008 and 2009. Factors contributing to this volatility included:

  • the strength and timing of the recovery from the recession;
  • rapid upswings and downturns in China’s construction industry;
  • the addition of night trading and higher trading volumes on the Shanghai Futures Exchange (SHFE)
  • the increased volume of commodity-metal hedge funds being traded in China;
  • disruptions to mining operations and uncertainties in smelter volumes.

During the last five years, the net effect of these factors has been a downward trend in copper and aluminium prices. The decreases in conductor prices have caused the cable market value, expressed in US dollars, to decrease over the last five years. This trend is likely to be reversed in 2017 with higher copper and aluminium prices being the main factor. 

 

Fibre prices shifted up in 2016, due to the fibre shortage. This shortage will likely last through 2017. Starting in 2017, new preform capacity is coming on-line. Preform capacity is likely to increase through 2019. The growth in fibre demand also may slow down. The result will be an end to the fibre shortage, probably occurring sometime in 2018.

 

Finally, we haven’t seen that raw materials have had a noticeable effect on operating margins, based on the financial reports of the publicly traded cable companies. For one thing, the larger listed companies often make a number of different types of cable, with varying material requirements and varying profitability. This means that market factors could affect the mix of products sold, making it difficult to see the effect of raw-material price changes in operating margins. 

 

Plus, cable makers often have contracts with metal suppliers that allow for adjustments in the prices in accordance with published price indexes. This means that fluctuations in conductor prices are passed through to the customer and do not directly affect operating margins.