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Copper semimanufactures: untapped market opportunities.

Copper semimanufactures: untapped market opportunities

World trade in copper semimanufactures reached approximately US$10 billion in 1989 and has been rising steadily over the last several years. This growth in international sales reflects an increasing use of copper and copper products in many rapidly expanding industrial sectors in the major markets, such as the electrical, electronics, machinery, transport and construction industries.

Developing countries account for over half of the world's mined copper, with production spread across a large number of countries in all developing regions. But these countries hold a much smaller share in world trade of copper manufactures and semimanufactures. A large part of their exports are in unwrought form, as copper concentrates, blister or refined metal. Through the intensification of research and development and the promotion of joint ventures and foreign investment, however, they should be able to increase the added value in these exports and, by applying dynamic international marketing strategies, to strengthen their sales of copper products on the world market.

The products

Copper semimanufactures consist of a large spectrum of products used in widely different applications. In broad terms they include copper wire, bars, rods, angles, shapes, sections, plates, sheets, strip, foil, tubes, pipes, fittings, bands, bars, powders and flakes. They are purchased for a variety of industrial uses, ranging from the manufacture of high-technology telecommunications devices to household clocks. (See below for a discussion of the major end-use sectors.) One of the essential elements in developing successful export business in copper semimanufactures is familiarity with the numerous outlets for these products and with the specific product requirements of each.

World trade situation

International trade in copper semimanufactures has been increasing by about 7% annually in volume since 1986 and reached nearly 2.35 million tons or US$10 billion in 1989. The major products traded are wires (about 43% of the total in volume terms); plate, sheets and strips (26%); bars and sections (17%); and tubes (14%).

Leading importing countries are Germany (291,000 tons in 1989), France (264,000 tons), the United States (225,000 tons), Italy (225,000 tons) and the United Kingdom (143,000 tons), which together accounted for nearly 50% of total world imports of copper semimanufactures that year. The highest import growth rates during the 1986-89 period were registered in the Republic of Korea, Spain, Hong Kong and Japan.

The principal exporters of copper semimanufactures in 1989 were Germany (534,000 tons), Belgium (345,000 tons), France (339,000 tons), Japan (169,000 tons) and Italy (160,000 tons), totalling 66% of all exports of these items on the international market. The most rapid export growth rates have been recorded by the United States, China (Taiwan Province), Portugal and Spain, whose foreign sales of these items have gone up by between 18% and 35% annually over the last several years.

The share of developing countries in the international trade of copper semimanufactures is small, but exports have increased from Yugoslavia, Turkey, Mexico, Chile and China in recent years.

During the last decade, the wrought copper market became larger and more competitive. Copper end-users in Europe, North America and Asia are looking for additional sources of supply from fabricators producing high-quality products, who can guarantee deliveries and offer competitive prices.

Leading markets

The leading markets for copper semimanufactures are discussed below.

United States: The United States is a major consuming country of copper semimanufactures, with purchases of 3.2 million tons in 1989 and a growth rate in demand of about 3% annually in volume terms over the 1986-89 period. Leading industrial users in 1989 were the sectors of building construction, purchasing 1.3 million tons; electrical and electronics products (750,000 tons); and industrial machinery and equipment (423,000 tons). Demand was especially high for building wire (531,000 tons in 1989), and for items used in the plumbing and heating industries (466,000 tons).

Other important industrial outlets for copper products in the United States include the sectors of telecommunications, air-conditioning and refrigeration, and automotive electrical end-uses.

U.S. imports of copper goods fell by 4% in volume annually from 1986 to 1989, from 254,000 tons to 225,000 tons. But foreign purchases of some products such as wires and alloys grew (the latter by 4% per year). Imports of rods, bars and sections increased by 55% annually, to 18,000 tons; alloys by 10% (to 34,300 tons) and copper sulphates by 70% (to 13,450 tons). Imports of insulated wire and cable rose from $672 million in 1986 to over $1 billion in 1988.

Asia: Asia is the fastest growing market for copper products, with demand rising by nearly 9% annually in volume over the 1986-89 period, reaching about 3.8 million tons (including scrap) the latter year. The principal markets in Asia are Japan, China, Hong Kong and the Republic of Korea. Major increases in copper consumption rates have occurred in Malaysia (by 84% per year from 1986 to 1989), Hong Kong, Indonesia and Thailand.

During the 1990s the Asian market for copper products is expected to grow the fastest of all regions but at slower rates than in the past decade. Countries in Asia currently import about 18% to 20% of the semimanufactures traded on the world market, with about 90% of this amount originating in the region. The remainder comes mostly from Europe and the United States.

Japan: Japan is both the leading Asian producer and consumer of copper semimanufactures (2.1 million tons in 1989) and the main exporter (169,000 tons), and is also becoming a prominent importer. From 1983 to 1989 its imports of these goods rose from 4,000 tons to 36,000 tons, i.e. an annual import growth rate of about 42% for the period and over 20% yearly from 1986 to 1989. Imports of copper wires increased from 3,000 tons in 1986 to 23,000 tons in 1989; plate, sheet and strip from 600 tons to 1,900 tons; and alloys from 5,000 tons to 7,000 tons. Imports are expected to rise further because of increasing domestic production costs for copper products and the growing consumption rates in the electrical, construction, engineering and automobile industries.

In several lines of copper products Japanese production has been relocated to other countries in the region.

Most of Japan's semimanufactured copper imports come from Asian countries or from Japanese manufacturers established there. But in some small segments of the market U.S. and European firms have important shares.

Hong Kong: Hong Kong is the main import market for copper semimanufactures in Asia, purchasing about 130,000 tons from foreign sources in 1989. It also had one of the highest import growth rates in volume terms (23% annually) in the second half of the 1980s. Hong Kong firms export about 4% of these products to Asian countries. The major importer items are copper wire; copper-clad laminates; brass plates, sheets and strips; and brass rods and sections. Products for which end-users and traders are seeking to diversify supply sources include power supply cords, hook-up wire, flat cables, polyurethane enamelled copper, copper-tin wire and copper rods.

The Hong Kong copper market is a highly competitive one, with supplies coming from more than 20 countries. During the last few years, Chinese copper manufacturers have increased their shares in several segments of this market, selling at low prices, while the shares of European manufacturers of more expensive goods have declined. Chinese copper fabricators have taken 25% of the copper wire import market; 45% of that for brass bars, rods and profiles; 53% of the brass wire market; about 55% of electric switches; and approximately 60% of coaxial cables.

In some segments, however, non-Asian exporters have captured important shares, as is the case of U.K. firms in the tube, pipe, blanks and fittings sectors, with 30% to 60% of the market; Italian exporters, with 30% of the bronze tube segment; and U.S. electronic connector firms, with 38%.

In the next several years Hong Kong's imports of copper products will probably slow down because of lower investment; the trend towards higher value-added products containing less metal; and the relocation of several copper end-use industries to Thailand, Indonesia, Malaysia and China. But copper imports are foreseen to continue to reach levels of over 100,000 tons a year, and demand for high-quality products at competitive prices is expected to expand.

China (Taiwan Province): China (Taiwan Province) has become the third largest copper consumer in Asia and the ninth in the world. Because of rapid industrial growth its copper consumption has risen by over 15% in volume annually, compared with a worldwide average of almost 2%. During the last several years this rate has gone up even further.

Imports of copper semimanufactures were estimated at 70,000 tons in 1989, which was 17% below the 1987 level, when they reached 84,000 tons. The principal imports were bare brass strips and bands (14,000 tons in 1988), copper-covered forming plates (12,000 tons), tubes and pipes (7,800 tons) and copper foils (3,200 tons).

Republic of Korea: The Republic of Korea, like Japan, China (Taiwan Province) and Thailand, has no copper mines, but has built up a modern copper semimanufacture industry during the last 20 years.

Major manufacturers in the country produce a wide range of items, from extra-fine wires to optical fibres, and over the years they have increased their output of cable appliances, lead frames, and car and magnet wires to satisfy growing demand in the computer, motor, electronics and metal industries.

The country exported 6,000 tons of copper tubes in 1988, while these imports came to 2,200 tons that year (the latter of higher priced varieties). In the next few years exporters of tubes to the Republic of Korea will probably have more opportunities to increase their sales, as the market is growing. Import demand should rise in sectors such as telecommunications, shipbuilding, aircraft maintenance, construction, electronics, machinery, chemicals and automobile manufacturing.

As in other Asian countries, manufacturers in the Republic of Korea are relocating labour-intensive industries to neighbouring countries, while increasing domestic output of more value-added products. Thus, demand for and imports of high-quality copper semimanufactures will be stronger, with import requirements more stringent.

Others: Other Asian markets for copper semimanufactures including Singapore, Thailand, Malaysia and Indonesia are registering growing sales of these products. In Singapore purchases of electronic wires, brass sheets and strips, and tubes are strong. The other three countries have high demand for a large range of copper semimanufactures.

West European market: Western Europe consumes over 30% of world output of copper semimanufactures, with purchases coming to 3.9 million tons in 1989. Germany, Italy, France and the United Kingdom account for about 70% of this amount. These four countries are also the major importers and exporters of copper semimanufactures, at combined levels of 923,000 tons and 1.13 million tons respectively in 1989.

Most of the West European trade in these products is intraregional. In 1989 about 4% of these imports came from outside the region. Buyers are, however, looking for more competitive suppliers in other countries. The main sources in other areas are the United States and Japan. Suppliers in developing and East European countries are becoming more active in the market. In Italy, for example, Turkish exporters hold about 14% of the copper wire market and Hungarians nearly 3% of the sheet and strip alloys market; small amounts of these products are also imported into Italy from Chile, Venezuela and Brazil.

Spain has become a growing market for copper products. Its imports of these items increased by over 25% between 1986 and 1989, reaching 107,000 tons the latter year. Other countries that strongly increased their imports during the same period were Portugal, with an import growth rate of 16% (17,000 tons in 1989); France, 15% (264,000 tons); Finland, 14% (33,000 tons); Italy, 14% and the United Kingdom, 13%. Wires, plates, sheets, strips and tubes have shown the most rapid import increases.

A number of structural changes have occurred in the West European copper manufacturing industry in the last several years, including various mergers and takeovers. Such changes will probably continue, thus further modifying the competitive situation. Competition may become even stronger as of 1993, when the unified market of the European Community (EC) comes into effect. This could possibly apply, for example, to such sectors as the automobile industry, affecting suppliers of raw materials and spare parts; telecommunications, affecting exporters of copper semimanufactures; and the engineering and contruction industries, where customized high-technology products in small series will be required.

In general the unified EC market will thus make greater demands on copper semimanufacture suppliers, who must be able to provide customized products and services.

East European market: The countries in Eastern Europe consume about 2.0 million tons of refined copper and more or less the same amount of copper semimanufactures annually, which represents approximately 16% of world consumption.

The region imports about 20,000 tons to 30,000 tons of copper semimanufactures a year, mainly from German, French and Finnish fabricators. Its major imported copper products are wires, tubes, plate, sheet and strip alloys. The USSR accounts for about 50% of the total purchased, followed by Czechoslovakia and Hungary. A large part of the USSR's imports are electrical wires and cables, estimated at $300 million annually, of which the items in strongest demand are high-voltage and multicore cables.

In the short term, demand in this market is expected to fall, but in the medium term it may rise, in line with more rapid economic development. An increase in joint ventures will favour modernization of the local copper semimanufactures industry and will benefit major East European fabricators of such products, i.e. the USSR, Poland and, to a lesser extent, Yugoslavia, which are at the same time large producers of copper ores. Over the longer term exports from this region will probably increase, especially to Western Europe, a development that may affect traditional copper exporters in Africa and Latin America.

Exporting countries

Developing countries account for about 55% of world production of copper concentrates, equivalent to nearly 5 million tons annually, with sources found in a large number of locations throughout all developing regions. They transform only 30% to 40% of this into copper semimanufactures. In developing countries most of the copper-manufacturing industries are small in scale and cover a wide range of products for domestic consumption and for export to neighbouring countries.

Major producers of semimanufactures among developing countries are paradoxically those with low mine output, such as Brazil and India, which manufacture more than five and two times respectively of the volume of copper that they mine, as well as countries without any copper mines, for example the Republic of Korea, China (Taiwan Province) and Thailand, which have built up modern copper manufacturing industries. On the other hand, long-term copper-exporting countries such as Chile, Peru, Zambia and Zaire together produce nearly 3 million tons of copper concentrates annually and 2 million tons of refined metal, but only 88,000 tons of semimanufactures.

China is the second largest Asian producer of copper semimanufactures after Japan, with about 550,000 tons annually. Copper fabricators in the country strongly increased their production capacity in the 1980s and have raised their shares in Asian and Middle East markets. It is highly possible that Chinese copper fabricators will play a more active role in the copper semimanufactures export market in the coming years.

India is the fifth largest producer of copper semimanufactures in Asia. In 1989 output came to 130,000 tons. The consumption rate of these items is high to meet growing industrialization needs. Considerable quantities are imported, but exports from the country are limited.

The Philippines and Indonesia transform only 8% to 10% of their mined output into copper semimanufactures (about 15,000 tons each annually). In the last few years the latter two have exported small quantities of copper wires, bars, rods and other items to Japan, Singapore, Hong Kong and China (Taiwan Province).

Of African exporters, Zambia and Zaire are major suppliers of unwrought copper. Zambia produces about 8,000 tons of semimanufactures annually and Zaire 2,000 tons. South Africa and Zimbabwe will probably play a more active role in international trade of these items in the coming years. They transform 30% to 50% of their mine production into semimanufactures (the former producing approximately 76,000 tons and the latter 8,000 tons per year).

Regarding Latin American producers, Brazil is the largest supplier of copper semimanufactures, followed by Mexico. Brazil produces about 220,000 tons a year, Mexico between 130,000 tons and 160,000 tons, Chile 43,000 tons and Peru 35,000 tons. Mexico and Chile should be in positions to develop export-oriented copper semimanufacture industries in the short term and Peru in the medium term.

Brazil's exports of semimanufactures have fluctuated in recent years, between 13,000 tons and 33,000 tons during the 1984-88 period (copper alloys included). The country has high domestic demand for these goods and a large production base for them. Because of its low mine output, it imports most of the unwrought copper ore for its semimanufactures.

Mexico already has an important copper semimanufacture industry representing more than 50% of its mine production (243,000 tons) and about 90% of its refined production. Mexican fabricators produce a wide variety of copper products ranging from extra-fine wires to insulated power cables and different types of tubes for the petrochemical and construction industries.

Chile is the world's largest source of copper concentrates. Its copper manufacturing industry, which is focused primarily on semimanufactures, produces a large number of items, of which 42% are consumed locally and 58% exported, over half to Latin America. During the 1980s Chilean exports of copper manufactures showed several swings, from 37,000 tons in 1980 down to 17,000 tons in 1985 and then up again in 1989 to 25,000 tons. In 1989 the main copper semimanufactures it exported were wire rods, shapes and cakes, tubes and large sheets.

Peru produces about 35,000 tons of different kinds of copper semimanufactures annually, with some destined for export markets. Venezuela also manufactures such goods for export, for instance cast rods. Other Latin American countries produce mainly for the domestic market.

Main end-uses

Demand for wrought copper (i.e. copper semimanufactures, alloys and manufactures) is strongly dependent on the supply situation in the unwrought copper market (ores, concentrates, blister, refined and scrap copper) and on demand in the industrial sectors. The principal sectors using copper products are described below.

Electrical and electronics: The electrical and electronics industries are among the major users of copper and copper alloy semimanufactures, accounting for over 45% of sales of these products. The increasing development of electronics products and growing consumption of electricity should expand future demand for different kinds of wires, cables and connectors.

High-technology sectors such as telecommunications will continue to be large and expanding consumers of copper products in spite of stiff competition from optical fibres and digital, mobile and satellite transmission. Telephone cords, high-quality wires, copper foils and strips will remain in strong demand as a result of increased production of an ever larger variety of telecommunications products and equipment, such as interphones, multifunction phones, answering and fascsimile machines, modems and components.

The electronics industry, another rapidly growing sector, is also an outlet for copper semimanufactures. Demand for traditional copper wires and strips dropped in the 1980s, however, because of the miniaturization of products and the reduction of metal per unit produced. On the other hand sales of high-quality extra-fine plate wires and copper alloy strips have increased in recent years.

The market for copper-beryllium alloys is estimated to be about 8,000 tons to 10,000 tons annually, with demand growing in sectors such as computers, automobiles and telecommunications. Copper-beryllium alloys are among the most expensive copper semimanufactures, about 12 to 16 times higher than the price of copper cathodes.

Another sector showing market growth is copper foils for printed circuit boards. During the last several years demand has expanded by 10% to 12% annually.

Sales of ultra-thin foils have also increased in some segments of the electronics industry, for use in flexible circuits, flexible connectors, flat cables and circuits for automobile dashboards.

Building and construction: This industry accounts for 25% to 30% of the consumption of copper semimanufactures. Building wires and copper tubes for heating, gas and plumbing are the major uses, accounting for about 75% to 80% of the sector's purchases of these products. Consumption of copper plumbing tubes in the United States alone is estimated at more than 250,000 tons annually and in Europe the figure is over 200,000 tons. The United Kingdom, Netherlands and France are the major users of copper water pipes, followed by Germany, the United States, Belgium and Italy.

Air-conditioning and refrigerating tubes are other important products. Sales of such tubes are estimated to be about 350,000 tons to 400,000 tons annually, with the United States and Asian countries the main consumers.

Demand for copper sheets and strips used in roofing for public buildings has grown during the last decade or so because of promotion by producers and fabricators. The market is currently estimated at 120,000 tons to 150,000 tons annually. Major outlets are Japan, Germany, Italy, Switzerland and the United States. Strong potential also exists in the Scandinavian and East European countries, Canada, France, the United Kingdom and Austria. In addition brass and copper sheets, strips and plates are used for the facades and decoration of buildings, which is a market that is still under-exploited because of lack of promotion and adequate marketing strategies.

Industrial equipment: This sector accounts for about 19% to 22% of total demand for copper semimanufactures. Copper items in demand include rods, bars, sections, hollow forms, tubes, plates, strips and wires. In-plant equipment industries utilize such items as bearings, bushings and motors. Industrial valves and fittings and heat exchangers are other end-uses for these products.

Transport Industry: The transport industry accounts for about 10% of total demand for copper semimanufactures. The road vehicle market is the major consumer, followed by railroad vehicles, marine craft and aircraft. The copper products used by these industries are essentially strips and strip alloys, rod alloys, tubes and wires for cooling systems, chassis parts, plating, motor starters and relays.

During the last few years the increasing use of electronics in automobiles (for brakes, suspension, dashboards, alarm systems and so on) has intensified demand for related component parts, including those constructed of copper. A standard medium-size car is estimated to contain 10 kg to 14 kg of copper, and in Japan the figure is 20 kg. Competition in the automobile components market is high, and buyers are increasingly diversifying supply sources.

Consumer end-use industries: Other market segments for copper and copper products are commercially under-exploited, including such items as consumer electronics and appliances. Examples of appliances using copper are washing machines, dishwashers, dryers, refrigerators, freezers, cooking ranges, electric ovens, fans, clocks, vacuum cleaners, food processors and power tools.

Other consumer products manufactured with copper include coins, brassware, copper kitchen products, locks, brass keys, bathroom faucets and fittings, and brass fireplace sets. With adequate promotion sales of these products should offer good potential in the future.

Prospects

Copper products have good potential on the international market in spite of competition from aluminum, steel, titanium and plastics.

But to maintain and expand market positions exporters of copper manufactures in developing countries should increase their promotional efforts, distribution networks, and research and development.

They should also target their most competitive products to the key market segments in order to build up a position that will permit them to extend their operations to other markets.

Those who can anticipate and satisfy buyers' needs and work together with them to develop products according to their requirements (including quality specifications and delivery schedules) should be able to gain market shares.

Research and development remains low in the copper industry. Many copper products are sold in traditional copper-using sectors as a result of copper's quality image. Sales to less traditional sectors are more limited because of a lack of technical promotion and publicity, among other factors.

Some of these problems may be overcome, for example, through joint ventures with copper manufacturers in developed countries. It is possible in coming years that, in order to strengthen their competitiveness, manufacturers in the industrialized markets will relocate selected lines of production in copper-producing developing countries.

At the same time refined producers and fabricators of copper in the latter countries will probably increasingly modernize their equipment and look for export-oriented joint venture partners to expand their export possibilities.

Industrial cooperation in this context could be mutually beneficial for both parties.

PHOTO : Copper sheets prepared for shipment at a Peruvian production site.

PHOTO : Stacking crude castings of copper at a copper smelting plant in Zaire.

Main importers of copper semimanufactures
 Importer 1989 imports Average annual change
 '000 tons 1986-89 (volume)
 %
Germany 291 2.7
France 264 15.0
United States 225 -4.0
Italy 225 13.7
United Kingdom 143 12.9
Hong Kong 130(*) 22.7(*)
Spain 107 25.4
Netherlands 104 2.8
Switzerland 100 4.9
Austria 89 6.0


(*)Estimates. Source: World Metal Statistics, London.

Main exporters of copper semimanufactures
 Exporter 1989 exports Average annual change
 '000 tons 1986-89 (volume)
 %
Germany 534 5.8
Belgium 345 7.5
France 339 9.4
Japan 169 -7.0
Italy 160 7.9
United States 110 35.3
United Kingdom 103 -1.5
China (Taiwan Province) 92 29.0
Sweden 84 1.2
Finland 65 6.0


Source: World Metal Statistics, London.

Saul Alanoca is a Chilean economist who is an ITC marketing consultant on metals and metal manufactures. He has cried out a number of advisory assignments for ITC and wrote a recent ITC market study on copper and copper products (published in 1990). This article complements and updates information in the ITC study.
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Author:Alanoca, Saul
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Date:Apr 1, 1991
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