Nexans sees limited scope for copper substitution

Reuters reported that record prices for copper will not lead to large scale use of cheaper alternatives by industrial consumers because copper retains clear technical advantages in wiring.

French cable group Nexans said that Benchmark copper prices CMCU3 on the London Metal Exchange breached the USD 10,000 mark for the first time last month after a rally driven by Chinese demand and tightening global supply.

This has led some manufacturers and distributors to warn of a shift towards less expensive substitute materials like aluminum and zinc while in France a surge in copper theft has led rail and power firms to consider alternatives.

Mr Frederic Michelland CFO of Nexans said that the company was increasingly using aluminum conductors and developing other alternatives but did not see a big shift away from copper. If you reasoned in purely financial terms copper would have been abandoned a long while back in favor of aluminum. Overall, copper still has a fundamental attractiveness that should last for some time to come."

Nexans executives said at a briefing on copper that substitution had remained limited in the past few years, representing between 450,000 tonnes and 600,000 tonnes annually compared with a global market of some 19 million tonnes of refined copper. Aluminum had claimed the largest share among copper substitutes and Nexans was notably developing use of copper-clad aluminum as a product that resolved some of the conductivity snags of aluminum.

Mr Michelland said that however, the cost advantage was not enormous and there were still technical drawbacks. There is not yet a miracle substitute product. Nexans, which supplies cables for sectors like energy, construction and construction is one of the world's largest private consumers of copper having used around 450,000 tonnes of the metal in 2010.

Executives reiterated that the groups longstanding ties with miners its systematic hedging, and practice of passing on copper prices to customers in contracts sheltered it from tensions in market prices and supply.

They said that the fact Nexans made its own copper rod from cathode bought from producers, unlike some competitors that buy rod from distributors, gave it a good understanding of upstream supply issues.

(Sourced from Reuters)