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European credit conditions still not improved: KME exec

Keywords: Tags  Riccardo Garrè, KME Group, copper, Metal Bulletin International Copper Conference, Aurubis, Codelco, Freeport-McMoRan, credit conditions Mark Burton

LONDON — Italian copper fabricator KME Group SpA and its customers have not seen an improvement in credit conditions in the European market over the past year, according to chief executive officer Riccardo Garrè.

"If you take Spain, for example, the risk premium today is actually higher than it was a year ago," Garrè said on the sidelines of the 26th International Copper Conference in Madrid sponsored by AMM sister publication Metal Bulletin. "Companies in the building industry don’t have cash and banks won’t provide credit, so they still don’t have the oxygen they need."

Speaking earlier during a panel discussion with executives from Aurubis AG, Freeport-McMoRan Copper & Gold Inc. and Corporación Nacional del Cobre de Chile (Codelco), Garrè called on producers to share the burden of providing credit to industrial copper consumers, reiterating a plea he and other fabricators made at last year’s conference. At the time, miners responded by warning that offering credit would divert investment away from the capital-intensive business of exploration and development.

The constriction in credit was particularly acute in late 2011 and early 2012, when international banks reined in lending to European institutions due to fears about stability in the eurozone, creating a critical shortfall in dollar funding.

Trade finance banks are expanding their business in Europe once again after largely withdrawing between late 2011 and early 2012, as Natixis Global Asset Management SA told Metal Bulletin recently.

But while they are re-establishing lines with physical traders, copper end users have not seen any easing in bank credit lines and remain reliant on the payment terms provided by suppliers, such as KME.

"It may be that we don’t see the effect downstream yet because we still don’t have the right conditions in terms of performance. Maybe in the second quarter the seasonal effects on activity in the market will fade and we will see an improvement, but I haven’t seen any sign of it yet," Garrè said.

A version of this article was first published by AMM sister publication Metal Bulletin.

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