Copper products demand rising, metal price hit margins: Cumerio
Source: Platts
metalsplace.com
The copper products business in Western Europe has shown signs of improving demand, but the high level of copper prices in 2006 stretched working capital availability and increased credit risk exposure, Belgian producer Cumerio said Wednesday.
Business for copper products in Western Europe, Cumerio's main market, showed signs of an improving demand despite the high prevailing copper prices in 2006, the company said, noting that wire rod consumption in the region rose by 4.2% compared to the previous year, mainly driven by a strong demand for power cables from the utility and industrial sectors.
Cumerio's wire rod deliveries increased by 8.2% to reach about 406,000 mt last year, while deliveries of cakes and billets remained stable at around 85,000 mt.
"The much improved deliveries were however not reflected in the business unit's results," the company said in a statement. "Premium levels did not offset the impact of higher energy and other costs, as they were as usual negotiated at the end of the previous year."
In the second half, Cumerio could obtain an additional contribution from customers, justified by the impact of much higher copper prices which, combined with continued buoyant demand, saw profitability improve in the second half of the year despite the usual seasonality effect, it added.
Meanwhile, the high copper prices "continued to have an important impact on the business," the company said.
"There has been a significant increase in working capital requirements leading to much higher levels of capital employed. The higher copper prices have also triggered a major increase in credit risk exposures, which in some cases has forced Cumerio to stop responding to the improving demand from customers," Cumerio said.
The copper price evolution has also had a "structural impact" on the sector as a number of industry players were "confronted with cash-flow problems and pressures on their margins," the company said, noting that this situation forced Prysmian, one of Cumerio's European competitors, to shut down its wire rod plant in the UK. This will reduce the total annual wire rod production capacity in Western Europe by around 150,000 mt, it added.
Cumerio's specialty rod business picked up during the year, with deliveries up by around 10% to 15,000 mt, the company said, adding: "The acquisition of a majority stake in Swiss Advanced Materials will further strengthen Cumerio's position in this higher added-value niche market, taking advantage from SAM's expertise in producing complex copper profiles."
Demand for copper products is expected to remain strong during 2007, while the segments results are expected to improve significantly as better premiums and reduced payment terms have been negotiated, the company said. |
