Other Metal Prices Also Increase
In some product sectors of the cable industry not only copper and aluminium but also other metals can have an important impact on the costs of specific products. For example, tin is widely used for plating copper conductors, while nickel-plating is used for high temperature applications (e.g. for aerospace) and silver is used for plating high performance conductors (e.g. for high frequency coaxial cables). Of all the LME metals, the price of copper has increased most, but the prices of other metals have also increased substantially over the last three years, with a big surge in 2006.
Zinc Moves in Step With Copper
Cable-making is not a major user of zinc, but the metal is needed for galvanising steel wire or tape that is used in the production of armoured cables (power and telecom) and of bare overhead aluminium conductors with steel reinforcement (ACSR). The price of zinc was generally flat between 2000 and 2004, but has shot up during 2006, more-or-less moving in step with the price of copper in relative terms, even though the drivers of demand for zinc are different from those that drive copper demand. The increase in the zinc price from UD$2,000/tonne at the start of the year to more than US$3,500/tonne at its peak has fed through to price adjust¬ments on galvanised wire used by the cable industry.
Optical Fibre Prices Stable
One cable-making raw material that has not followed the general upward trend is optical fibre. Fibre prices started to collapse in 2001 when the telecom investment boom halted. Prices have continued to fall in later years, but have been relatively stable in recent months, though single mode fibre prices, which at the peak of the market were as high as US$50/fibre-km, are now as low as US$8 to US$12/fibre-km. Though there has been substantial rationalisation in the industry since 2001, fibre production capacity continues to exceed supply, so there has been little opportunity for price rises.
High Strength Fibres
Some cable designs, notably fibre optic cables, require non-metallic reinforcement using high strength fibres. Aramid is the main type of fibre used, including the trade names Twaron and Kevlar (DuPont). This type of fibre is widely used in security applications such as bulletproof vests. In 2001 there was a surge in demand because of the Iraq war, but this happened to coincide with strong demand for telecom cables. For a time many cable-makers found it difficult to obtain aramid fibre. Though the supply situation has eased since then, this is a good illustration of how factors completely unrelated to cable markets can impact on the industry.