WIREROD SUPPLY

European Copper Wirerod Capacity Cutbacks in 2006

In the last review of raw material trends we noted that there could be some tightness of copper wirerod supply in Europe. This was the likely result of Prysmian closing its UK wirerod mill in December 2006, and Nexans deciding to reduce its exposure to external wirerod and wire customers. Both these decisions were influenced by the high price of copper. The value of the working capital tied up in copper wirerod operations increased substantially as the copper price rose, making it difficult for producers to achieve a worthwhile return on capital without both reducing the credit terms extended to customers and an increase in the wirerod premium.

Additional Copper Wirerod Plants in Europe

More recently, there has been a move to increase European production of copper wirerod. In Spain La Farga Group is installing a new wirerod mill with annual capacity of 180,000 tonnes. Production is due to start in January 2008. Unlike some other markets of Western Europe, there has been reasonably strong growth in Spanish cable production in recent years, and Spain currently imports a substantial volume of copper wirerod. Furthermore, the new plant’s location near Barcelona also allows it to serve the growing market in North Africa more readily than plants located in Northern Europe. Further east, in Turkey Oznur Kablo is also building a new copper wirerod plant with production capacity of 70,000 tonnes/year.

Aluminium Wirerod Production Grows

During 2007, according to CRU’s initial estimates, global production of aluminium wirerod has been growing faster than production of copper wirerod. Much of this growth in aluminium wirerod production is likely to be associated with strong demand for bare aluminium overhead conductors, as a result of investment by power utilities in transmission networks, but it also indicates robust global demand for insulated cables using aluminium conductors (predominantly power cables). In the Middle East, where demand is particularly strong, Midal Cables has expanded its wirerod production capacity and Oman Cables Industry has recently announced that it will build a new plant for production of aluminium wirerod and conductor.