Global Cable Market ReviewRob Daniels – Principal Consultant, CRU Presentation to 6th Arabcab Conference Beirut, 3 – 4 May 2010 LONDON | BEIJING | PHILADELPHIA | WASHINGTON 31 Mount Pleasant, London WC1X 0AD UK Tel +44 20 7903 2000 Fax +44 20 7837 0976 www.cruanalysis.com Presentation Structure 1 2 3 2009 Global Market Dimensions Regional Trends Outturn for 2010 and Beyond 4 Some Thoughts on the Future Global Market Fell Sharply in 2009 ‘000 tonnes conductor 15000 Growth of just 1.2% in 2008 Fall of 7.7% in 2009 Average growth of 5.3% over the period 2003-07. 10000 5000 Winding Wire Communication Energy 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Data: CRU . Fibre Optic Cable Market Continued to Grow in 2009 ‘000 fkm 170000 160000 150000 140000 130000 120000 110000 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 1998 Boom in Long Distance Sector Strong Growth Since 2005 Market Collapses in 2002 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Data: CRU . Global Insulated Wire & Cable Market Worth Just Over US$122bn in 2009 US$ million 160000 120000 80000 2008 market on a par with 2007 due to little volume growth and slightly lower raw material prices.6% fall in 2009 due to lower raw material prices and lower volumes Winding Wire 40000 Communication Energy 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Data: CRU . but 23. 400/tonne Aluminium 3000 2000 1000 0 Data: LME .300/tonne 2011 US$7.US$/tonne 10000 9000 Copper Price Continues its Upward Path 2009 average copper price US$5170/tonne Copper 8000 7000 6000 5000 4000 Copper price forecast: 2010 US$7. Global Market Enters Recession in Q4 2008 Global Recession 2004 Sees Very Strong Growth 0 -2 -4 -6 -8 -10 -12 -14 -16 -18 The End of 23 Quarters of Continuous Growth Data: CRU .y-o-y % change 12 10 8 6 4 2 World Copper Cable Consumption . LV Energy Cable is the Largest Product Sector by Value Total Market Value US$122bn LV Energy 37% Power Cable 30% Definitions LV Energy – Rated below 1kV Power Cable – Rated 1kV and Above Telecom .External copper telecom cable Data – All types of cable for data transmission Winding Wire – All enamelled wire and covered conductors Fibre Optic – All fibre optic cables Fibre Optic 6% Winding Wire 13% Data: CRU Telecom Cable 4% Data Cable 10% . Power Cable Sector Best Performer After Fibre Optic 20 15 10 5 0 -5 -10 -15 Year-on-year % change in volume in 2009 -20 -25 LV Energy Data: CRU Copper Power Aluminium Power Telecom Data Winding Wire Fibre Optic . Presentation Structure 1 2 3 2009 Global Market Dimensions Regional Trends Outturn for 2010 and Beyond 4 Some Thoughts on the Future . America West Europe East Europe N.China has Continued to Grow but Big Falls in the Developed World 15 Year-on-year % change in metallic cable consumption volume 10 5 0 -5 -10 -15 -20 -25 -30 N.E. Asia China Rest of the World 2006 2007 2008 2009 . China Accounted For Over a Third of Global Metallic Cable Output in 2009 Percentage 35 30 25 20 15 Shares of Global Production for the Three Largest Producers China USA Japan 10 5 0 2000 Data: CRU 2001 2002 2003 2004 2005 2006 2007 2008 2009 . overtaking China.7% in volume in 2009 India could become the fastest growing major market. Winding Wire Series3 Internal Telecom/Data External Copper Telecom Aluminium Power Cable Low Voltage Energy 0 2005 2006 2007 2008 2009 Data: CRU .‘000 tonnes conductor 800 700 600 500 400 300 200 100 Indian Cable Market Edges Higher in 2009 The Indian metallic cable market grew by 2. in a few years. 3% in 2009 to 254. 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 Data: CRU .Russian Metallic Cable Production Collapses in 2009 ‘000 tonne conductor 450 400 350 300 Winding Wire Internal Telecom/Data External Copper Telecom Aluminium Power Cable Copper Power Cable Low Voltage Energy Russian metallic cable production fell by 34.000 tonnes conductor. North American Production Continues to Fall ‘000 t conductor Winding Wire 2.4% in 2009.5% 2005 2006 2007 2008 2009 500 0 Data: CRU .000 1.500 LV Energy 1.000 North American metallic cable production fell by 22.500 Internal Telecom/Data External Copper Telecom Al Power Cable Copper Power Cable 2. Fibre optic cable production fell by 16. Presentation Structure 1 2 3 2009 Global Market Dimensions Regional Trends Outturn for 2010 and Beyond 4 Some Thoughts on the Future . but for most other markets 2010 will prove to be a much better year after the sharp falls in 2009.Outlook for 2010 and Beyond • Whilst the recovery from the global recession remains fragile the fact that most markets have stabilised and some modest growth is starting to be seen means that for 2010 was are predicting a 5. For Europe and North America the metallic cable market will still not have regained pre-crisis levels even by 2013.9% rise in metallic cable consumption. The fibre optic cable market will remain relatively stable in 2012 and 2013.5%. In the fibre optic cable sector a slowdown in China will not quite be offset by growth in many other markets and as a result global demand is forecast to fall by 2. We are forecasting that growth in China will slow in 2010 compared to 2009. with the power cable sector the second weakest after external copper telecom cable. We are forecasting that the winding wire sector will see the strongest growth in 2010. • • • • . We are forecasting that global metallic cable market growth will peak in 2011 before moderating in 2012 and 2013. E.Growth Forecast for All Major Regions in 2010 15 Year-on-year % change in consumption volume 10 5 0 -5 -10 -15 -20 -25 N. Asia Rest of the World -30 2009 2010F . America East Europe China West Europe N. Presentation Structure 1 2 3 2009 Global Market Dimensions Regional Trends Outturn for 2010 and Beyond 4 Some Thoughts on the Future . • Increased raw material price volatility is forecast. • Globalisation amongst customers is also increasing.Factors that Will Shape Industry Evolution • The current recession has served to accelerate the rising importance of Asia within the global metallic cable industry. This is expected to result in more co-ordinated purchasing by large international companies which will be looking to take advantage of their purchasing power. and so cable companies will need to be able to cope with this. • As the cable industry expands in developing countries. • For many parts of the Western World total metallic cable production volumes are forecast to never regain previous peaks. these manufacturers will look to become more international players as their home markets mature. . Thus further industry rationalisation looks inevitable. Encore. Prysmian and Draka. E. Hitachi Cable. Fujikura.The Large US and European Cablemakers have been Outperforming those from N. H1 2002 H2 H1 2003 H2 H1 2004 H2 H1 2005 H2 H1 2006 H2 H1 2007 H2 H1 2008 H2 H1 2009 .E. Asia in the Last Three Years 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 Average Operating Margin % US/Europe N.E. Furukawa.Asia data is average of Sumitomo Electric. Nexans. N. Taihan and Pacific Electric. CommScope. Asia US/Europe data is average of General Cable. Western Europe and North East Asia companies have had to face overcapacity in the face of falling demand. In North East Asia the industry has stayed with essentially the same structure but market discipline has been well maintained.How Have Other Regions Dealt with Overcapacity? • • • In North America. profitability has in general been lower than in Western Europe and North America. In Asia there has been little industry consolidation and many of the leading manufacturers remain generalists with a wide product range. • • • . In Western Europe and North America the industry has consolidated to leave fewer large players and companies have become more focussed on specific product sectors rather than trying to compete in all market sectors. Even with this market discipline. so CRU believes that the cable industry in Asia could learn from what has happened in North America and Western Europe. This presents a potential opportunity for focused specialists to emerge in developing countries as these markets become more mature. as the previous chart showed. which will typically require more or larger cable to be used. . • • • Increased grid interconnections. Increased investment in the extraction of oil and other commodities in the face of growing demand and high prices. Increase in the production of electric vehicles Strong growth in demand for all types of electrical and electronic equipment and appliances around the world Continued investment in telecom networks. • • • • Growth in construction of high speed rail networks to compete with air travel. Introduction of energy efficiency regulations.Reasons to Be Optimistic About Future Cable Market Growth As the recovery from the recession gathers pace we believe there are a number of factors which lead us to be optimistic about future growth in wire and cable demand. Roll out of smart grids and other investment in ageing grids in the developed world. These include: • • Growth in wind energy and other green and nuclear energy generation and other distributed generation. London WC1X 0AD UK Tel +44 20 7903 2000 Fax +44 20 7837 0976 www.daniels@crugroup. 3 – 4 May 2010 LONDON | BEIJING | PHILADELPHIA | WASHINGTON 31 Mount Pleasant.com .com Tel + 44 20 7903 2118 Presentation to 6th Arabcab Conference Beirut.Thank You For Your Attention robert.cruanalysis.