MATERIALS
(pages 3-11)
STATISTICS
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The ICF Newsletter is published
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International Cablemakers
Federation.
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ICF NEWS
ROME 2007
159 participants found their way to Rome to attend the 2007 Congress and our
social events. Our records show that this was the best attendance since 1997 in
San Francisco and an encouraging continuation of the increase in attendance in
the last years. All Congress proceedings have been mailed to members and are of
course available for download in the member section of our website.
Mr. Gregory Kenny, President & CEO of General Cable Corp. has taken over the
Presidency of ICF. On behalf of all members he thanked his predecessor Mr. Norio
Okayama, Chairman of the Board of Sumitomo Electric Industries Ltd. for the
outstanding leadership and pro-active contributions to the development of the
Federation during his term as President of ICF.
NEW MEMBERS
We are very pleased to welcome ENERGOCOMPLEKT LTD., Belarus and ITALIAN
CABLE COMPANY S.p.A., Italy as new members of our Federation. More informa-
tion about both companies can be found at www.vikab.by and www.icc.it.
ICF CONGRESS DUBAI 2008 IN A NEW FORMAT
The 2008 Congress will be held at the Hotel Hyatt Regency from 21 to 25 October.
The Congress in Dubai will be the first event in a new format. The first day will
remain as it is, with meetings of the ICF Standing Commission and the ICF Council
followed by the Welcome Reception. The second day will be an exclusive
members-only day, featuring high-level political/economical presentations (a mix of
customer & market presentations), specific regional presentations and macroeco-
nomic & societal presentations concluding with the General Assembly. The third
day will foresee the opening of the Congress to suppliers and analysts (both as
attendees and presenters) on a strictly invitational basis concluding with an evening
event.
ICF COUNCIL AND ICF STANDING COMMISSION
Information on the composition of the ICF Council and the ICF Standing Commission
after the General Assembly in Rome is available on our website www.icf.at under
organisation.
Thomas Neesen
Secretary-General page 3
ICF NEWS | ISSUE 60
INTRODUCTION
Continuing
Price
Volatility
A review in
the December
2006 issue of
the ICF News-
letter discussed
the impact of price trends of major raw
materials on the cable industry and the
industrys customers. During 2005 and
2006 prices of many key raw materi-
als used in cable-making rose sharply.
In some cases material prices became
much more volatile, with substantial
fluctuations in market prices on a short
timescale. Over the last twelve months
prices of most raw materials have gen-
erally remained at high levels, and price
volatility has continued to be a key fea-
ture of base metal markets, including
copper.
Impact of High Material Prices
In this article we update and extend the
discussion of raw material price trends
contained in the earlier article from
December 2006. We look at develop-
ments in some key cable-making materi-
als over the past twelve months and we
also discuss the impact of high material
prices on some sectors of the cable mar-
ket that were not covered in the previous
article in depth:
auto cable and build-
ing wire. We highlight some potential
issues relating to material substitution
(especially substitution of copper by
alternatives) in some types of cable,
and review the possible impact of CCA
(copper-clad aluminium) conductors.
Another very real issue in many markets
that has become a much bigger problem
as a consequence of persistently high
metal prices is
cable theft.
RAW MATERIAL
PRICE TRENDS
Recent Copper Price Trend
On three occasions in 2007 (early May,
July and early October) the LME cop-
per price has gone above US$8,000
per tonne, before falling back to around
US$7,000/t. During 2007 the price didnt
surpass the peak level of US$8,500 per
tonne that was touched in May 2006.
The copper price tumbled to a 9-month
low of US$6,330/t in December 2007,
but has been climbing again in January
2008, back to US$7,280/t. The lowest
level reached in the last 18 months was
in early 2007, when the price dropped
below US$5,300/t. Even this low price
is, of course, much higher than the price
level that prevailed before copper prices
began to rise steeply in 2005.
Strong Copper Demand Outside US
Despite the downturn in the US during
2007, as the fall in house construction
activity reduced demand for building
wire and copper semis, the price of cop-
per held up. In 2007 weaker demand
for copper in the US and in North East
Asia has been outweighed by continu-
ing growth elsewhere. Strong demand
from China is the main factor, but other
developing countries are also reasonably
strong. Even in Western Europe demand
has not so far been much affected by the
slowdown in North America.
Q4 07 Looks Weaker
During late 2007 there were, however,
some indications of weaker demand for
RAW MATERIALS
PRICE TRENDS AND IMPACT ON CABLE MARKETS
Provided by CRU
QUARTERLY AVERAGE COPPER PRICE
US$/tonne (LME Cash)
Data: CRU, LME
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
During Q4 06 and Q1 07 copper price dropped, but later
recovered. General trend in Q4 07 was downwards. page 4
ICF NEWS | ISSUE 60
copper in Europe. Even in China cop-
per consumption in Q4 07 was signifi-
cantly lower than in Q3 07, though some
commentators suggest that the adverse
trend will not continue in 2008. The main
weak spots for refined copper demand
have been in copper semis, rather than
wire and cable markets. There has, for
example, been a downturn in Chinese
exports of air conditioners, due to the
weaker housing market in the US, which
has reduced Chinese demand for cop-
per tube. These soft spots in demand
account for the retreat of the copper
price in late 2007.
Mining Industry Consolidates
On the supply side there are inevitable
short-term swings in market sentiment,
as a result of news from the copper
mining industry relating to industrial
disputes, production disruptions, etc.
Overlying these day-to-day develop-
ments, during the last two years the
consistently high level of metal prices
has stimulated takeover activity in
the global mining industry. The large
metal mining groups typically have a
wide portfolio of working mines and
exploitable reserves. Although copper
is an important element of these oper-
ations, other base metals (nickel, etc.)
are also important, while the largest
groups have very diverse interests that
extend into mining of iron ore, baux-
ite, coal, etc. The most recent round
of consolidation in the mining industry
began in 2006, and since then there
has been a series of deals that have
involved many of the major players in
the mining business.
Series of Deals in 2006 and 2007
In 2006 Xstrata bought Falconbridge,
beating an offer from its rival Inco, a
company that was itself at the time sub-
ject to a bid from Phelps Dodge. The
Brazilian group CVRD subsequently
bought Inco. Then, in November 2006,
Freeport McMoRan reached agreement
to buy Phelps Dodge, both these com-
panies being major copper producers.
Subsequently Freeport sold the wire &
cable business, Phelps Dodge Interna-
tional, to General Cable. Phelps Dodge
would have been the last major mining
group to be integrated downstream into
cable-making, except that, as a result
of Rio Tintos takeover of Alcan in 2007,
Rio Tinto now owns the Alcan cable
business, as well as all its other alumin-
ium interests. Most recently (November
2007) BHP Billiton has made a bid for
Rio Tinto. The scale of this proposed
merger is vast, with BHP Billiton iden-
tifying potential for US$3.7 billion per
year in quantified synergies. There
have also been reports that the Chi-
nese steel-maker Baosteel is interested
in bidding for Rio Tinto!
Aluminium Price
Moves Up in Q4 07
The short-term spike in aluminium pric-
es that occurred in June 2006 has not
been repeated in 2007. During 2007 the
trend in the aluminium price was gen-
erally downwards, though it moved up
in November, at a time when the price
of copper (and most other base met-
als) was falling quite sharply. But, as in
most past periods, the volatility in the
price of aluminium has been much lower
than the volatility in the copper price. As
we noted in the December 2006 review,
there are some fundamental differences
between the economics of the copper
and aluminium industries that explain
why supply constraints are generally
less critical for aluminium than they are
for copper.
Aluminium Producers
Seek Lower Cost Operations
Most of the added value generated in