Copper end use trends

The latest figures released on the Chinese Customs' website show imports of unwrought copper and semi-finished copper products in August fell 4% month-on-month, to 178,047 tonnes. The fall comes despite many traders predicting an increase as prices on the international markets fell relative to the SHME price. One analyst commented on the news that, "the Olympics probably depressed imports even though the narrowing of the spread should have supported them. Chinese stocks are low and prices in Shanghai are pretty firm so we could see a bounce in September."

Sark Wire Corporation, a wholly-owned subsidiary of Turkish based Sarkuysan, is to open a copper wire processing facility in Albany with investment of US$10m. The new facility will have capacity to process 30m lbs of copper per annum and is due to be fully operational in 2009, creating 30 new jobs.

In late August, Furukawa Electric announced they would be raising prices for enamelled wire as they try to offset the rising cost of energy and varnish, particularly for polyvinal formal enamelled copper wire (PVF). According to Furukawa varnish and energy costs have increased 40% and 80% respectively since fiscal 2004. Sumitomo Electric, Hitachi Cable, Unimac and Totoku Electric have all also announced that they are either negotiating price rises on future shipments or conducting studies into a price increase. However, slowing demand for electric wire and electronic parts may make any further price hikes difficult. An industry source commented that, "makers could only get a higher price for PVF."

The International Copper Promotion Council (ICPC) is expecting Indian demand growth to be cut by almost half, to 8-9 percent this fiscal year, down from an average of 15% over the past two years. Strong industrial growth, residential construction and consumer spending have spurred on demand in Asia's third-largest economy, with copper consumption reaching 512,000t in 2007. However, rising inflation, and the subsequent hike in interest rates, looks set to cool demand growth this year. Industrial growth for June was reported at 5.4%, nearly half what it was in 2007. "The consumption of copper -based appliances in the white goods segment will slow down due to a reduced rate of growth in disposable incomes. This will also be a dampener on copper consumption," said a member of the ICPC in India. Ongoing government investment in power infrastructure and a growing emphasis on more energy-efficient appliances will protect demand, according to the ICPC, "partly cushioning the impact of a moderating economy."

Zhejiang Hailiang Co Ltd announced plans to build a high copper production line, with annual capacity of 71,000 tons, under the newly established Hailiang (Vietnam) Copper Co Ltd. The subsidiary will receive total investment of US$40m, which comprises US$32.69m cash capital and US$7.31m equipment capital. As well as transferring its domestic production line, which has an annual capacity of 35,000 tons, Hailiang will also upgrade the Vietnam facility, adding a further 36,000 tons to the new operation. The Hailiang (Vietnam) plant is expected to be operational within one year.

Crane Group, an Australian non-ferrous metals and plastic products manufacturer and distributor, announced revenue for the year ended 30th June 2008 of AUD$2,352m, a year-on-year increase of 7.6%. Net profit after tax before significant items rose to AUD$63.8m, an improvement of 18.2% on last year, thanks to strong results from the firm's plastic piping and distribution arms, Pipelines and Tradelink. Crane Copper Tube, the Group's non-ferrous metals division, reported EBIT of AUD$4.0m compared with a loss of AUD$2.5m last year. Revenue was up 2% to AUD$142m as stronger export sales helped offset subdued demand from the domestic plumbing market, according to Crane Group. "The lean manufacturing programme progressively introduced at CCT over the past two years continues to provide benefits in both productivity and working capital efficiency," said the company.

"A decade ago, there were 1.1billion pounds of brass rod consumed in the United States. This year, it's projected to be about 600million pounds," said the President of Chase Brass. Recent years have seen increasing numbers of manufacturers of copper and brass product moving their operations overseas to low-cost locations such as China. A representative of the United Steel Workers union said, "We went through the 1980's and the 1990's recessions and never really felt it here, but for the last decade we've really felt it." According to the union, Chase has struggled to secure consistent supplies of scrap due to fierce competition from overseas. Chase claims that its Montpelier, Ohio facility is among the most technologically advanced and efficient brass plants in the world, but it has difficulty, "competing against Chinese brass facilities that are subsidised by that country's central government." Chase Brass is presently owned by KPS Capital Partners, a private equity firm, who bought the company last November.

H1 reports from China's metal companies have revealed difficult operating conditions as rising energy prices, investment in environmental protection and an increase in resource tax have squeezed margins. Shares in the metal index fell 58.6% in the first half of the year, underperforming the SSE Composite Index which saw a 48% decrease. Copper companies fared better than most as the copper price remained at historically high levels and prices of sulphuric acid - a byproduct of the copper treatment process - soared. Jiangxi Copper, China's biggest producer, reported strong results with a 55% surge in revenues year-on-year. Net profit grew at the slower rate of 32.8%, reducing the company's profit margin to 10.4%, from 12.1% in the first half of 2007. The company has a slightly bearish outlook for the rest of this year, as the continued slowdown in the global economy takes its toll on copper demand and the appreciation of the dollar puts downward pressure on copper prices. However, it suspects copper supply will remain tight, which should support prices on the downside. Yunnan Copper Company struggled in the first half as revenue fell 18.9% and net profit plunged 29.5% y-o-y. The companies profit margin was cut to 3.8%, from 4.4% in the first half of 2007. A 45-day machine overhaul was blamed for the poor sales figures as output remained flat, whilst high energy prices pushed up production costs. Tongling Nonferrous Metals saw similar problems to Yunnan as rising raw material prices and fluctuations in the copper price cut the gross margin in the firm's copper unit to just 0.59%. Company-wide results were improved greatly by the strong performance of sulphuric acid, where gross margin increased to 71.6%, bringing Tongling's profit margin to 2.9%, up from 2.0% in H1 2007.

Mitsubishi Materials Corp. plans to invest in a copper mine in British Columbia by acquiring a 25% stake in Similco Mines Ltd, which owns rights to the mine. Production at the mine is planned to resume in 2011 after a break in operations since 1996, a result of the low copper prices prevailing at that time. With a view to redeveloping the mine, the overall investment is expected to reach Y30 billion. The annual capacity of the mine is estimated at about 150,000 tonnes and Mitsubishi Materials will have the right to the entire output. The investment project is based on the expected long-term demand growth in China and India.

Here is what we had in the initial KMC Futures trend. See also the alliance with GE.

10/08/2008 - Norsk Hydro is pouring $15 million into Colorado based thin-film module developer Ascent Solar, raising its stake back up to the 35% figure it had before Ascent's secondary share issue in May..

Linderme Tube was a manufacturer of copper and aluminium products. The company was founded in 1927 and employed some 81 people, mostly residents of Euclid and Cleveland. According to a Linderme spokesman, the company has sold all its assets to Small Tube Products Co. and ended production on 1st October. Small Tube Products is a leading North American producer of copper and specialty alloy tubes. It was acquired by Wolverine Tube in July 1994 and was sold recently based on Wolverine's decision to focus on its core products.

Fujikura Dia Cable (FDC), the joint venture of Fujikura and Mitsubishi Cable Industries, announced a 14% year-on-year decline in their building cables shipment for the period April-September 2008. FDC describe the current situation as a difficult one, especially due to weak demand. The manufacturer, facing decreased inventory value due to falling copper prices, has to sell at relatively low prices reducing profit margins. FDC cable shipments fell by 8% in 2007 and the initial target for 2008 was to grow back to the 2006 level. However, this was revised down because of sales results. Overall profitability is also affected by rising prices of insulating and sheathing materials.

Japanese electric wire and cable manufacturer Fujikura Ltd reported consolidated financial results for the first quarter ended 30 June 2009. The company achieved sales of ¥112.93b (US$1.19b) for the first quarter, 28.7% lower than the same period a year ago. Operating income for the first quarter was ¥1.84b (US$19.4m), 50.3% lower than the year-ago level. Net income for the same period was ¥111m (US$1.17m), 94.3% lower than a year ago. The company is expecting to make a net loss of ¥800m (US$8.43m) for the first half ending 30 September 2009.