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					NEWS                    Issue 60 | January 2008




RAW MATERIALS
PRICE TRENDS AND IMPACT ON
CABLE MARKETS
STATISTICS
ICF NEWS | ISSUE 60




                                    ICF NEWS

                                    ROME 2007

CONTENT                             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.
COVER STORY:
                                    Mr. Gregory Kenny, President & CEO of General Cable Corp. has taken over the
RAW MATERIALS                       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
(pages 3 -11)
                                    outstanding leadership and pro-active contributions to the development of the
                                    Federation during his term as President of ICF.
STATISTICS

                                    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.

I.C.F                               The Congress in Dubai will be the first event in a new format. The first day will
P.O.BOX 26                          remain as it is, with meetings of the ICF Standing Commission and the ICF Council
Graben 30                           followed by the Welcome Reception. The second day will be an exclusive
A-1014 Wien                         members-only day, featuring high-level political/economical presentations (a mix of
Austria                             customer & market presentations), specific regional presentations and macroeco-
                                    nomic & societal presentations concluding with the General Assembly. The third
Phone +43-1-532 96 40               day will foresee the opening of the Congress to suppliers and analysts (both as
Fax +43-1-532 97 69                 attendees and presenters) on a strictly invitational basis concluding with an evening
Web www.icf.at                      event.
Contact renate@icf.at

The ICF Newsletter is published     ICF COUNCIL AND ICF STANDING COMMISSION
several times each year by the
International Cablemakers           Information on the composition of the ICF Council and the ICF Standing Commission
Federation.                         after the General Assembly in Rome is available on our website www.icf.at under
                                    “organisation”.
The ICF accepts no responsibility
for the accuracy or the content
of materials provided by third
parties as identified.              Thomas Neesen
                                    Secretary-General

page 2
                                                                                                                    ICF NEWS | ISSUE 60




RAW MATERIALS
PRICE TRENDS AND IMPACT ON CABLE MARKETS
Provided by CRU



INTRODUCTION                                 RAW MATERIAL                                             level that prevailed before copper prices
                                                                                                      began to rise steeply in 2005.

                          Continuing         PRICE TRENDS                                             Strong Copper Demand Outside US
                          Price                                                                       Despite the downturn in the US during
                          Volatility         Recent Copper Price Trend                                2007, as the fall in house construction
                          A review in        On three occasions in 2007 (early May,                   activity reduced demand for building
                          the December       July and early October) the LME cop-                     wire and copper semis, the price of cop-
                          2006 issue of      per price has gone above US$8,000                        per held up. In 2007 weaker demand
                          the ICF News-      per tonne, before falling back to around                 for copper in the US and in North East
                          letter discussed   US$7,000/t. During 2007 the price didn’t                 Asia has been outweighed by continu-
the impact of price trends of major raw      surpass the peak level of US$8,500 per                   ing growth elsewhere. Strong demand
materials on the cable industry and the      tonne that was touched in May 2006.                      from China is the main factor, but other
industry’s customers. During 2005 and        The copper price tumbled to a 9-month                    developing countries are also reasonably
2006 prices of many key raw materi-          low of US$6,330/t in December 2007,                      strong. Even in Western Europe demand
als used in cable-making rose sharply.       but has been climbing again in January                   has not so far been much affected by the
In some cases material prices became         2008, back to US$7,280/t. The lowest                     slowdown in North America.
much more volatile, with substantial         level reached in the last 18 months was
fluctuations in market prices on a short     in early 2007, when the price dropped                    Q4 07 Looks Weaker
timescale. Over the last twelve months       below US$5,300/t. Even this “low” price                  During late 2007 there were, however,
prices of most raw materials have gen-       is, of course, much higher than the price                some indications of weaker demand for
erally remained at high levels, and price
volatility has continued to be a key fea-
ture of base metal markets, including
copper.                                          QUARTERLY AVERAGE COPPER PRICE
                                                 US$/tonne (LME Cash)
Impact of High Material Prices
In this article we update and extend the         9,000
                                                                   During Q4 06 and Q1 07 copper price dropped, but later
discussion of raw material price trends
                                                                   recovered. General trend in Q4 07 was downwards.
contained in the earlier article from            8,000
December 2006. We look at develop-
                                                 7,000
ments in some key cable-making materi-
als over the past twelve months and we           6,000
also discuss the impact of high material
prices on some sectors of the cable mar-         5,000
ket that were not covered in the previous
                                                 4,000
article in depth: auto cable and build-
ing wire. We highlight some potential            3,000
issues relating to material substitution
(especially substitution of copper by            2,000
alternatives) in some types of cable,
                                                 1,000
and review the possible impact of CCA
(copper-clad aluminium) conductors.                  0
Another very real issue in many markets
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that has become a much bigger problem
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as a consequence of persistently high
metal prices is cable theft.                                                                                                                        Data: CRU, LME



                                                                                                                                                       page 3
ICF NEWS | ISSUE 60



copper in Europe. Even in China cop-        would have been the last major mining             than the volatility in the copper price. As
per consumption in Q4 07 was signifi-       group to be integrated downstream into            we noted in the December 2006 review,
cantly lower than in Q3 07, though some     cable-making, except that, as a result            there are some fundamental differences
commentators suggest that the adverse       of Rio Tinto’s takeover of Alcan in 2007,         between the economics of the copper
trend will not continue in 2008. The main   Rio Tinto now owns the Alcan cable                and aluminium industries that explain
weak spots for refined copper demand        business, as well as all its other alumin-        why supply constraints are generally
have been in copper semis, rather than      ium interests. Most recently (November            less critical for aluminium than they are
wire and cable markets. There has, for      2007) BHP Billiton has made a bid for             for copper.
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-             QUARTERLY AVERAGE ALUNIMIUM PRICE
per tube. These soft spots in demand            US$/tonne (LME Cash)
account for the retreat of the copper
price in late 2007.
                                                3,000
                                                                       Aluminium price moved up in H1 07, approached
Mining Industry Consolidates                                           US$3,000/tonne, but fell in Q3 07.
On the supply side there are inevitable         2,500
short-term swings in market sentiment,
as a result of news from the copper             2,000
mining industry relating to industrial
disputes, production disruptions, etc.
                                                1,500
Overlying these day-to-day develop-
ments, during the last two years the
consistently high level of metal prices         1,000
has stimulated takeover activity in
the global mining industry. The large             500
metal mining groups typically have a
wide portfolio of working mines and                 0
exploitable reserves. Although copper
                                                         92

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is an important element of these oper-
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                                                                                                                                        20
ations, other base metals (nickel, etc.)
are also important, while the largest                                                                                          Data: CRU, LME
groups have very diverse interests that
extend into mining of iron ore, baux-
ite, coal, etc. The most recent round       Rio Tinto. The scale of this proposed             Aluminium Producers
of consolidation in the mining industry     merger is vast, with BHP Billiton iden-           Seek Lower Cost Operations
began in 2006, and since then there         tifying potential for US$3.7 billion per          Most of the added value generated in
has been a series of deals that have        year in “quantified synergies”. There             production of refined aluminium arises
involved many of the major players in       have also been reports that the Chi-              in smelting, rather than extraction of
the mining business.                        nese steel-maker Baosteel is interested           bauxite / alumina. The raw material is
                                            in bidding for Rio Tinto!                         abundant, and the main element of cost
Series of Deals in 2006 and 2007                                                              is electricity used in refining. The recent
In 2006 Xstrata bought Falconbridge,        Aluminium Price                                   modest rise in the price of aluminium has
beating an offer from its rival Inco, a     Moves Up in Q4 07                                 been supported by the decline in the
company that was itself at the time sub-    The short-term spike in aluminium pric-           value of the US dollar and the rise in the
ject to a bid from Phelps Dodge. The        es that occurred in June 2006 has not             oil price. Since energy is a major com-
Brazilian group CVRD subsequently           been repeated in 2007. During 2007 the            ponent of the costs of producing refined
bought Inco. Then, in November 2006,        trend in the aluminium price was gen-             aluminium, increases in spot power rates
Freeport McMoRan reached agreement          erally downwards, though it moved up              drives up the marginal cost of aluminium
to buy Phelps Dodge, both these com-        in November, at a time when the price             smelters. Aluminium companies are now
panies being major copper producers.        of copper (and most other base met-               looking to develop smelter projects in
Subsequently Freeport sold the wire &       als) was falling quite sharply. But, as in        Africa (including ones in the Congo,
cable business, Phelps Dodge Interna-       most past periods, the volatility in the          Algeria and Angola), where operating
tional, to General Cable. Phelps Dodge      price of aluminium has been much lower            costs are lower.


page 4
                                                                                                               ICF NEWS | ISSUE 60



        China Discourages Metal Exports                Other Metals: Zinc                            and the country is not far from switching
        Increased demand from the developing           Apart from being used for galvanising         from being a net exporter of tin to a net
        world, but China in particular, is the main    steel wire armour, the other main use         importer. The other main countries pro-
        fundamental factor that has underpinned        for zinc in wire & cable is for galvanising   ducing refined tin are Indonesia, Peru,
        high commodity prices over the last two        steel wires used in overhead conduc-          Malaysia and Thailand. The price of tin
        years. As a result of its growing industrial   tors. Though the price of zinc (averag-       during 2007 has at times gone above
        production, China is a major importer of       ing about US$3,500 per tonne in 2007)         US$15,000 per tonne, and during H2
        many scrap metals, including copper.           is lower than that of copper, it is high      07 the price has continued to climb,
        Recent increases in theft of cables and        compared to the price of steel wire, so       in contrast to most other base metals.
        other metallic items in various parts of the   suppliers of steel wire may try to pass       From the cable-maker’s point-of-view tin
        world are often attributed to the demand       on price increases due to strong move-        is one of those materials for which cost
        created by high levels of scrap purchas-       ments in the zinc price to their custom-      increases may have to be absorbed in
        es, especially by China. The authorities       ers, including cable-makers. China is         slimmer margins if they cannot be recov-
        in China have played an active part in         much the largest producer country of          ered in higher cable selling prices.
        encouraging imports of key metals and          zinc, as well as being by far the larg-
        discouraging exports from China. In an         est consumer. While China in some             Oil Price at Record Levels
        effort to ease potential shortages, the        recent months has been a net importer         After the cost of the conductor, the other
        Chinese government imposed a 10%               of zinc, it does not have the dominant        main element of cost in most cables is
        tariff on exports of copper products           effect that it has at times in the copper     the cost of the polymeric material used
        in 2006 and removed import tariffs on          market, through drawing in imports of         for insulation and sheathing. The price
        copper scrap. The Chinese authorities          refined copper and copper scrap from          of oil is a key driver of the price of poly-
        have been also discouraging exports of         many parts of the world.                      meric materials, nearly all of which are
                                                                                                     derived from petrochemicals. Moving
                                                                                                     on a broadly parallel course to many of
                                                                                                     the base metals, the price of crude oil
QUARTERLY AVERAGE ZINC AND TIN PRICES                                                                reached a peak in mid-2006, and then
Zinc US$ / tonne (LME cash)                                        Tin US$ / tonne (LME cash)        fell back. During 2007 the price of oil has
                                                                                                     increased once again, passing the pre-
5,000                                                                                 20,000         vious peak price attained in 2006, and
                                                                                                     during December 2007 the price of Brent
                                                                                                     Crude oil came very close to US$100
4,000
                                                                                      15,000         per barrel. Polymer prices, especially
                                                                                                     polyethylene, also moved up in Q3 07,
3,000                                                                                                though the surge in polymer prices was
                                                                                      10,000         not as marked as the sharp upwards
2,000                                                                                                rise in the oil price. The main reason for
                                                                                                     the high level of prices has been high
                                                                                      5,000          demand, with the main growth areas
1,000
                                                                                                     being developing economies, though
                                                                                                     worries over possible supply shortages
    0                                                                                 0              have also pushed oil prices higher.
           2000     2001      2002     2003     2004    2005     2006     2007

  Zinc US$ / tonne         Tin US$/tonne                                     Data: CRU, LME
                                                                                                     WIREROD
        aluminium by imposing export tariffs. A        Other Metals: Tin                             SUPPLY
        5% tariff on exports of aluminium ingots       Tin is only a minor element of metal con-
        was applied in January 2006, and then          sumption for cable production. Though         European Copper Wirerod
        raised to 15% in November 2006. As             tin is widely used for electroplating wires   Capacity Cutbacks in 2006
        aluminium producers reacted by switch-         in some types of communication and            In the last review of raw material trends
        ing their exports into semis, a 15% tar-       LV energy cables, the amounts of tin          we noted that there could be some tight-
        iff was applied to exports of aluminium        deposited are small compared to the           ness of copper wirerod supply in Europe.
        rods, bars and sections in August 2007,        weight of copper used in the conductor.       This was the likely result of Prysmian
        while the 5% tariff on primary aluminium       As with other metals, activity in China       closing its UK wirerod mill in December
        imports was suspended.                         is a key driver of global demand for tin,     2006, and Nexans deciding to reduce


                                                                                                                                         page 5
        ICF NEWS | ISSUE 60



                                                                                                        without both reducing the credit terms
                                                                                                        extended to customers and an increase
QUARTERLY AVERAGE PRICE BRENT CRUDE OIL                                                                 in the wirerod premium.
US$ / barrel
                                                                                                        Additional Copper
100                                                                                                     Wirerod Plants in Europe
                                      Strong upward trend in 2007,                                      More recently, there has been a move to
 90
                                      above US$90/barrel at times in Q4 07                              increase European production of cop-
 80                                                                                                     per wirerod. In Spain La Farga Group is
 70                                                                                                     installing a new wirerod mill with annual
                                                                                                        capacity of 180,000 tonnes. Production
 60
                                                                                                        is due to start in January 2008. Unlike
 50                                                                                                     some other markets of Western Europe,
 40                                                                                                     there has been reasonably strong growth
                                                                                                        in Spanish cable production in recent
 30
                                                                                                        years, and Spain currently imports a
 20                                                                                                     substantial volume of copper wirerod.
                                                                                                        Furthermore, the new plant’s location
 10
                                                                                                        near Barcelona also allows it to serve
   0                                                                                                    the growing market in North Africa more
                                                                                                        readily than plants located in Northern
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                                                                                                        Europe. Further east, in Turkey Oznur
                                                                                                        Kablo is also building a new copper wir-
                                                                                      Data: EIA, CRU
                                                                                                        erod plant with production capacity of
                                                                                                        70,000 tonnes/year.

                                                                                                        Aluminium Wirerod
POLYMER PRICES PEAK AGAIN?
                                                                                                        Production Grows
US ¢/lb                                                                                                 During 2007, according to CRU’s initial
                                                                                                        estimates, global production of alumini-
110                                                                                                     um wirerod has been growing faster than
                                                                                                        production of copper wirerod. Much of
100
                                                                                                        this growth in aluminium wirerod pro-
 90                                                                                                     duction is likely to be associated with
                                                                                                        strong demand for bare aluminium over-
 80                                                                                                     head conductors, as a result of invest-
                                                                                                        ment by power utilities in transmission
 70
                                                                                                        networks, but it also indicates robust
 60                                                                                                     global demand for insulated cables
                                                                                                        using aluminium conductors (predomi-
 50                                                                                                     nantly power cables). In the Middle East,
                                                                                                        where demand is particularly strong,
 40
                                                                                                        Midal Cables has expanded its wirerod
 30                                                                                                     production capacity and Oman Cables
                                                                                                        Industry has recently announced that it
 20                                                                                                     will build a new plant for production of
                                                                                                        aluminium wirerod and conductor.
           99



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       PVC        LDPE      HDPE                                         Data: Chemical Week, CRU       OPTICAL FIBRE
        its exposure to external wirerod and wire             in copper wirerod operations increased    Fibre Demand
        customers. Both these decisions were                  substantially as the copper price rose,   Up in 2006 and 2007
        influenced by the high price of copper.               making it difficult for producers to      In contrast to the continuing buoyant
        The value of the working capital tied up              achieve a worthwhile return on capital    market for metals, the price of opti-


        page 6
                                                                                                                   ICF NEWS | ISSUE 60



       cal fibre has remained obstinately flat,            of optical fibre in some markets, but         additional capacity while prices remain
       despite healthy growth in demand.                   prevailing prices have been very slow         at current subdued levels?
       Global demand for fibre grew strongly               to react. It is too early to talk in terms
       during both 2005 and 2006. Demand                   of clear price rises, but fibre produc-       Some Capacity
       growth has continued in 2007, though                ers may now have greater freedom to           Expansion Underway
       the growth rate has slackened. CRU                  increase the volume of fibre supplied         After the market collapse that followed
       estimates that global demand for fibre              to customers that pay higher prices.          the last boom in fibre demand in 2000
       was 27% higher in 2006 than in 2005,                Another factor that is important in the       and 2001, some fibre production capac-
       and is likely to be a further 11% ahead             optical fibre market is the impact of         ity was “put into mothballs”, rather than
       in 2007. Not all regional markets for fibre         exchange rates. With the US dollar            being totally closed. Now that demand
       optic cable have been showing consist-              falling against most currencies, fibre        is recovering, the most obvious poten-
       ent strong growth, but the general trend            suppliers quoting in euros or yen have        tial bottleneck is limited capacity for pro-
       in global demand has been upwards.                  effectively had price increases in US         duction of preforms, especially as some
       Demand in North America, for example,               dollar terms, even if in local currency       fibre-drawers rely on externally sourced
       grew strongly in 2005 and 2006, mainly              terms prices have been flat.                  preforms. Some of the mothballed fibre
                                                                                                         production capacity has been brought
                                                                                                         back on-stream as demand has grown.
                                                                                                         Thus in the US, for example, Draka
EXCHANGE RATE TRENDS AGAINST US$                                                                         Comteq has restarted production at its
Jan 2006 = 100                                                                                           Claremont plant and Corning is re-open-
                                                                                                         ing its plant at Concord. In the developing
125                                                                                                      world some major fibre producers, such
                                                                                                         as YOFC in China and Sterlite in India,
                                         Strong gains against the US$
120                                                                                                      are expanding capacity in response to
                                                                                                         strong demand in their home markets.
115                                                                                                      Unless optical fibre demand increases
                                                                                                         very quickly, the potential for fibre supply
110                                                                                                      to fall well behind demand, with a result-
                                                                                                         ing major rise in prices, seems limited.
                                                                                                         This situation contrasts with what has
105
                                                                                                         been happening in base metal markets,
                                                                                                         where supply constraints are much more
100
                                                                                                         severe and difficult to overcome.

 95


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                                                                                                         MATERIAL
                                                                                                         SUBSTITUTION
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                                                                                                         Equivalent Performance
      Euro/US$      Yen/US$         Rupee/US$         CN¥/US$
                                                                                                         at Lower Cost
                                                                                                         When the cost of a material rises, basic
       driven by fibre to the home (FTTH) instal-          No Acute Capacity Shortage Yet                economics suggest that end-users will
       lation, but demand in 2007 is likely to be          This situation of generally flat prices is    look for alternative materials that can
       a little lower than in 2006, as the level of        likely to continue, so long as there is       deliver equivalent performance at a
       Verizon’s purchases of fibre optic cable            some spare competitive capacity that          lower total cost. In practice the pres-
       has fallen. In China and India there has            fibre producers can use to gain incre-        sure for substitution of a material like
       been very strong growth in fibre optic              mental revenue at current apparently low      copper due to its higher price may
       cable demand over 2006 and 2007.                    price levels without having to make addi-     be inhibited by several factors. For
                                                           tional major investment. There has been       example, determining if an alternative
       But Optical Fibre Prices                            much debate within the industry as to         material, such as aluminium for cable
       Remain Flat                                         when existing fibre production capacity       conductors, really can offer “equivalent
       As a result of the strong demand for                will be full, at which point there should     performance” may not be straightfor-
       fibre optic cable there have at times               be scope for fibre prices to rise. But will   ward. Established custom and practice
       been reports of short term shortages                fibre producers be willing to invest in       also carries a lot of weight, as speci-


                                                                                                                                             page 7
        ICF NEWS | ISSUE 60



        fiers are likely to be reluctant to switch      Material Substitution                       usage of aluminium. In other cable appli-
        from a tried-and-tested solution to an          Despite the continuing high level of cop-   cations where copper very much domi-
        alternative whose performance may be            per prices, there has not been a major      nates usage, there has been no rapid
        less well understood.                           shift away from copper to aluminium for     switch to aluminium, despite the high
                                                        conductors in wires and cables, though      copper price, though the alternatives to
        Copper v. Aluminium                             there has been a continuing slow drift      copper are being considered more seri-
        For cable applications it is the ratio of       away from copper in some applica-           ously. We will look in more detail at two
        the price of copper and the price of            tions. This general reluctance to switch    of these cable applications, building wire
        aluminium (“Cu/Al price ratio”) that is         away from copper to alternative mate-       and auto cable.
        the most important parameter in con-            rials contrasts with some other, non-
        sidering potential for substitution of          cable applications for copper, where
        copper by aluminium. In order to get            substitution has been quite rapid. For      BUILDING WIRE
        a fairer comparison between the met-            example, in many markets where cop-
        als in terms of conductance per buck,           per tube has traditionally been used        Limited Use of
        the aluminium price per tonne should            for plumbing in water supply and heat-      Aluminium Building Wire
        be divided by 2.0: aluminium has                ing systems, cross-linked polyethylene      From a global perspective, the use of
        lower conductivity than copper, but             (known in this application as PEX, not      aluminium conductors in building wire is
        much lower density. Hence the cost              XLPE) tube has grabbed market share         very limited. Aluminium is not accepted
        advantage in favour of aluminium is             from copper. Installation methods are       at all in many markets and in others it
        even larger than the simple price com-          simpler for PEX tube than for copper, so,   is only used a little, even though its use
        parison (per tonne) implies, though in          once the initial reluctance to switch was   may in some localities be permitted in
        practice some of this cost advantage            overcome, substitution has been rapid,      building codes and wiring regulations.
        would be lost in the greater volume             given a major difference in the costs of    Even in some markets where aluminium
                                                                                                    building wire was widely used at one
                                                                                                    time (e.g. India), copper building wire
                                                                                                    is now generally preferred. Despite the
COPPER / ALUMINIUM PRICE RATIO                                                                      major increase in the cost of copper
Ratio                                                                                               over the last two years, there are few
                                                                                                    signs that aluminium is making a definite
 4,0                                                                                                comeback in building wire.
                              Cu/Al ratio peaked above 3.0 in Q3 06,
                              returned to similar level in Q3 07.                                   Bad Experience in 1960s
                                                                                                    The lack of acceptance of aluminium in
 3,0                                                                                                building wire is usually attributed to bad
                                                                                                    experiences with aluminium wires that
                                                                                                    were reported in the 1960s and 1970s.
                                                                                                    In North America poor quality joints in
 2,0
                                                                                                    aluminium wiring were identified as a
                                                                                                    possible cause of some house fires.
                                                                                                    The type of aluminium originally used
 1,0                                                                                                in building wire (EC grade, the same
                                                                                                    as power cables) had a higher rate of
                                                                                                    creep than copper. Aluminium was also
                                                                                                    incompatible with steel screws used in
 0,0                                                                                                jointing accessories. Poor contact at
                                                                                                    joints allows an oxide layer to form, and
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                                                                                                    the temperature rises due to the higher
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                                                                                                    resistance. Even though alternative alu-
                                                                              Data: CRU, LME
                                                                                                    minium alloys and improved accessories
                                                                                                    for building wire were developed after
        of insulation and sheathing needed              the alternatives. In some cable markets,    these potential problems were under-
        for aluminium cables. The Cu/Al ratio           for example utility power cables, where     stood, there has been no major swing
        reached a peak above 3.0 in 2006, and           aluminium conductors have long been         back to aluminium building wire, despite
        has come close to this level once again         accepted in some markets, the high          the apparent cost advantage of alumin-
        in late 2007.                                   copper price has encouraged a greater       ium over copper.


        page 8
                                                                                                    ICF NEWS | ISSUE 60



                         Aluminium           pump, etc. Copper is also widely used        may need to be made flat rather than
                         Promoted            in the connectors within the wiring har-     circular and mounted underneath the
                         by Some             ness, normally in the form of brass alloy,   vehicle. As a result of the more sophis-
                         Companies           and in other electrical components (e.g.     ticated connectors that are required to
                         In North Amer-      motor commutators). As a result, cop-        achieve highly reliable connections, alu-
                         ica some cable      per is one of the key materials used by      minium cable systems are not neces-
                         companies have      the auto industry, with a typical content    sarily cheaper than copper equivalents,
                         been actively       of 20 kg or more of copper per vehicle.      even though the conductor cost is much
promoting the virtues of aluminium con-      Copper was at one time also used for         lower than with copper.
ductors in building wire. It can be useful   other vehicle components, but in some
to offer customers an alternative to cop-    applications it has lost ground to alter-    Aluminium Auto Primary Wire
per wire when prices are high, though        native materials. Thus most cars now         In principle, aluminium conductors could
there are other reasons why a cable sup-     use aluminium radiators, rather than         be used more widely in vehicles within the
plier might want to promote aluminium        copper/brass.                                primary wiring, with potential for a weight
conductors over copper. Firstly, groups                                                   saving of several kilograms. Achieving
that have upstream interests in produc-      Pressure for Cost Reduction                  weight reduction is a key design consid-
tion of refined aluminium and wirerod        As with all other suppliers to the automo-   eration in modern vehicles, as this can
would want to encourage greater con-         tive industry, there has been increasing     lead to lower fuel consumption. One
sumption of aluminium. Secondly, there       pressure on auto harness producers to        of the main technical problems limiting
may be some competitive advantage in         achieve cost reductions, year after year.    greater use of aluminium conductors is
supplying building wire using aluminium,     This has resulted in a shift in regional     the need to achieve high reliability in con-
rather than copper. Not all companies        harness production to lower cost labour      nectors. Furthermore, the greater bulk of
can offer a full range of building wires,    areas, so that for example, locations like   aluminium conductors can be a problem
both copper and aluminium, so those          the Philippines have developed a major       where several cables have to occupy a
with the full range of both may prefer       industry in auto harness assembly for        small space.
to promote aluminium products where          export. The rise in raw material prices,
the competition may be less intense          impacting especially on the cost of the      Alternatives to Copper
and margins potentially higher than in       copper conductor, but also on the cost       Lower weight, not so much lower cost,
the established product, copper build-       of insulation materials, has disrupted       has been the main driver in looking to
ing wire.                                    the well-established trend of ongoing        alternatives to traditional copper con-
                                             cost reductions in the auto industry. Of     ductors for auto cables. Even when
                                             course, over the last two years other        copper continues to be used, cable
AUTO CABLES                                  major cost elements within a vehicle,        designs can be refined, for example
                                             for example the steel used in bodywork       through the use of true concentric
Main Materials: Copper, PVC, etc.            and many mechanical components,              strands rather than bunched conduc-
For many years automotive wiring har-        have also risen substantially in price.      tors, allowing thinner insulation and a
nesses have been gradually increasing        Auto manufacturers have been very            more compact cable without sacrific-
in complexity as the number of electri-      reluctant to accept any price increases      ing flexibility. Amongst the major wiring
cal circuits required in vehicles has been   from their suppliers to reflect material     harness producers, different compa-
increasing. The main materials used in       cost increases.                              nies are looking at a number of different
the cable elements of an auto harness                                                     alternatives to copper conductors. As
are copper for the conductors and PVC        Aluminium for Battery Cables                 noted, aluminium primary wire is one
or XLPE (cross-linked polyethylene) for      Though most automotive cables use            possibility, but copper clad aluminium
the insulation. In many markets there is     copper conductors, some companies            is another. For finer sizes of wires it may
an increasing interest in zero halogen       have introduced battery cables with          also be possible to reduce weight while
insulation materials.                        aluminium conductors. This has been          staying with copper by reducing con-
                                             driven mainly by a need to achieve lower     ductor sizes and using hard-drawn cop-
Copper Key Material                          weight, rather than cost reduction. The      per or copper alloys with greater tensile
Within an auto copper is also used           weight distribution of a high performance    strength than the usual annealed copper
extensively in the winding wire of elec-     car is improved by placing the battery at    wire. The timescale for any such devel-
tric motors. Modern vehicles with fea-       the rear of the vehicle, requiring a bat-    opments is likely to be slow, as harness
tures such as electric windows use           tery cable several metres long, which        designers have to work very closely with
many additional small electric motors,       would be very heavy if made of cop-          the car producers and any successful
in addition to the traditional starter       per. Because of their physical size, bat-    innovations would be introduced as new
motor, generator, wiper motors, fuel         tery cables with aluminium conductors        models come on stream.


                                                                                                                              page 9
ICF NEWS | ISSUE 60



COPPER-CLAD                                  of copper prices and increased produc-
                                             tion volumes of CCA that are becoming
                                                                                            premises, but they might find an applica-
                                                                                            tion at the lowest end of the LAN cable

ALUMINIUM                                    available from China.                          market, such as home networks. It has
                                                                                            also been suggested that CCA can be
                                             CCA Used for HF Applications                   used more widely in building wire or LV
Growing Interest in CCA                      One of the main traditional applications       power cable, but there would be major
Over the last year in many markets there     of CCA is in communication cables as           hurdles to be overcome in terms of get-
has been increasing interest in copper-      the central conductor of coaxial cables.       ting this alternative material accepted in
clad aluminium (CCA) wires as a pos-         CCA is also sometimes used in enam-            building codes and wiring regulations.
sible way of reducing material costs in      elled magnet wire when low weight is
certain types of cable. Several Chinese      critical (e.g. coils for headphones and air-
companies have perceived a potential         craft instruments). Due to the skin effect,
market opportunity and installed equip-      which means that high frequency signals
ment for production of CCA wire. CCA         are mainly transmitted in the surface lay-
consists of copper cladding surrounding      ers of a conductor, CCA is usually used
an aluminium core. The most common           for carrying high frequency signals. For
grade of CCA is 10% CCA, meaning that        these applications (e.g. coaxial cable)
it contains 10% copper by volume: only       the higher DC resistance of the alumin-
5% of the radial thickness of this grade     ium core is not so important. Indeed, in
of CCA is copper and the rest is alumin-     really high capacity, very high frequency
ium, though it contains approximately        coaxial cables signal transmission within
43% copper by weight, since copper is        the central core of the conductor is so
a much denser metal than aluminium.          negligible that hollow copper tubes, not
10% CCA has an overall conductivity of       solid wires, may be used.
65% IACS, i.e. 65% of the conductivity
of an all copper conductor of the same       CCA Producers Consolidate
cross-section, but its average density is    There are several producers of CCA
only 37% of copper.                          conductors in China, but the largest of
                                             these is Fushi International, a Chinese
CCA Promoted as Low Cost                     company that is listed in the US. The          Copper Wire Scrap Recycled
CCA suppliers promote the material as        main producer of CCA (and also cop-            Copper wire scrap normally trades at
offering most of the advantages of alu-      per-clad steel used in coaxial cables          only a modest discount compared to
minium, such as having lighter weight        and drop wires) conductors outside             copper cathode, since, so long as the
and lower cost than copper, but with-        China is Copperweld Bimetallics with its       purity of the scrap is guaranteed, it can
out the main perceived disadvantages         main production facility in the US and a       be easily recycled with minimal need for
of aluminium. With CCA they argue            smaller one in the UK. CommScope is            further refining. However, guaranteeing
that there is no need, as there can be       also a producer of CCA conductors in           the purity of the scrap in-feed material
with aluminium wires used in LV energy       the US. During 2007 Fushi International        is critical, since any contamination by
cables, for specially designed acces-        acquired Copperweld, making this com-          other elements could potentially lead
sories to give reliable electrical connec-   pany a major global player in this niche       to an expensive batch of substandard
tions. Though CCA appears to have a          cable-making material.                         production. Some copper wire scrap is
significant cost advantage over cop-                                                        generated during the cable production
per because its main constituent is the      New Applications for CCA?                      process, while some is recovered from
cheaper metal aluminium, in practice         Apart from the traditional applications of     cables at the end of their life. There have
some of this advantage is eroded by          CCA, in coaxial cables and some spe-           always been good economic arguments
the higher fabrication costs of CCA, as      cialised magnet wires, it has also been        for recycling copper wire scrap, but there
cladding processes are more complex          promoted for other applications such           is an even stronger need for maximising
than conventional wire-drawing. Tradi-       as LAN cables. Some Chinese produc-            scrap recovery when metal prices are as
tionally, in developed economies CCA         ers have offered LAN cables containing         high as they are currently.
has not been widely used as a low cost       CCA, rather than copper wires, at pric-
alternative to copper: for example, some     es significantly lower than conventional       Potential for
lightweight aircraft cables using CCA        LAN cables. We understand that these           Scrap Contamination
actually cost more than their copper         low cost substitutes would not meet all        Tinned copper wire can be readily identi-
equivalents. This situation is, however,     the technical performance specifications       fied, segregated and diverted through its
changing due to the sustained high level     required for LAN cables used in business       surface appearance, but scrap CCA wire


page 10
                                                                                                     ICF NEWS | ISSUE 60



is potentially much more of a problem.      an in-feed material for coin blanks that        have decided to invest more heavily in
Superficially CCA wire appears to be the    use alloys containing copper and alu-           wireless networks due to the persistent
same as copper wire: it is necessary to     minium, so a market for CCA wire scrap          problem of cable theft. However, even
look at the wire in cross-section to be     could develop if the material came into         these “wireless” systems are not immune
sure that a wire is pure copper and not     wider use.                                      and can be disrupted by cable theft, as
CCA. The aluminium content of CCA is a                                                      cables used within wireless base sta-
big potential hazard as it could contami-                                                   tions may be targeted by thieves. In India
nate a batch of clean copper wire scrap,    CABLE THEFT                                     the main telco, BSNL, has attributed the
and careful checking would be needed                                                        loss of fixed line customers in some cit-
                                            Theft a Worldwide Problem                       ies to disruptions in services caused by
                                            There continue to be frequent reports of        cable theft, though it also suggests that
                                            cable theft, both of power cables and of        there may be more involved than low-
                                            telecom cables, from many parts of the          level criminality. BSNL has accused rival
                                            world, with cables being stolen for the         phone companies of encouraging “anti-
                                            scrap value of their metal content, espe-       social elements” to cut BSNL’s cables.
                                            cially copper. Though cable theft has
                                            existed as a low level problem for many         Not Even
                                            years, it has become a much more seri-          Fibre Optic Cables are Safe!
                                            ous issue as a result of the rise in metal      In an unusual variation on the theme of
                                            prices. This problem is widespread and          cable theft, in 2007 there were reports
                                            is certainly not limited to poorer devel-       from Vietnam that thieves using fish-
                                            oping countries. For example, in the            ing vessels had stolen several lengths
                                            US local telecom carriers have regular          of fibre optic cable from the seabed in
                                            problems with theft of sections of pole-        the South China Sea! This caused major
                                            mounted copper telecom cables from              disruptions in the country’s international
                                            their access networks. In the UK, British       communications. The scrap value of
                                            Transport Police, the force that main-          such submarine cables must be small –
                                            tains security on the rail network have         containing metal only in the form of steel
                                            stated that reducing cable theft is one of      armour and copper wire used to power
to avoid this problem. This has not been    their highest priorities – only countering      repeaters. Thieves have also damaged
a major issue while CCA wire has been       potential terrorist threats ranks higher.       land-based fibre optic cables in Kenya,
used only in niche applications, but it                                                     presumably acting under the mistaken
would become a more serious problem if      But Especially in                               belief that these cables contained valu-
CCA were in wider use. In Europe a major    Developing Countries                            able copper scrap.
copper producer and scrap recycler has      But the problem of cable theft is particu-
already experienced problems with CCA       larly acute in some developing countries.
contamination of its scrap feedstock.       In China there were 190,000 recorded            CONCLUSIONS
In China there has been caution about       incidents of theft of “telecom facilities” in
approving CCA more widely because of        2006, up from 53,000 in 2005. In South          Despite the continuing high and volatile
concerns about CCA scrap.                   Africa the power utility Eskom lost cables      level of prices, copper continues to be
                                            valued at R20 million in 2006, while            by far the most popular conductor mate-
Little Value in CCA Scrap                   Transnet Freight Rail lost cable worth          rial in many types of cable. Any substitu-
On the other hand, CCA has sometimes        R5.5m. Building construction sites in           tion of copper by alternative materials is
been promoted on the grounds that it        South Africa have been the targets of           much less obvious for cable applications
has lower scrap value than pure copper      raids by well-organised armed gangs,            than it is for some non-cable applica-
because it cannot be recycled as read-      so that cable is stolen even before it can      tions. There are, however, some signs
ily as copper! The outer copper coating     be installed. South Africa is an exporter       that OEMs and end-users are consid-
of CCA wire cannot be easily stripped       of copper, despite the country having no        ering the alternatives to copper more
away from the aluminium core. Thus          copper mines!                                   seriously. Most commentators suggest
cables containing CCA should be less                                                        that the currently high level of material
attractive to thieves, as the scrap value   Encourages Adoption of Wireless                 prices will not be sustained long term.
is much lower than copper, though it        Cable theft is not only a cost burden           Once prices do return to a lower level,
may be optimistic to expect criminals       for end-users, but can affect their stra-       the search for alternatives to copper
to be so well informed. There are some      tegic decisions: in some African coun-          in cable applications is likely to have a
potential outlets for scrap CCA, such as    tries, such as Kenya, telecom operators         lower priority.


                                                                                                                             page 11
                           RAW MATERIALS
PRICE TRENDS AND IMPACT ON CABLE MARKETS

				
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