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Aluminum captures some copper market share: General Cable executive

Keywords: Tags  General Cable, aluminum, copper, pricing, market share, electrical applications, automotive, building wire Greg Kenny

CHICAGO — A major consumer of both copper and aluminum says a battle for dominance presses on between the two markets for certain applications, particularly as pricing differentials make the economics of substitution increasingly attractive.

For example, as a conductor of electricity, "we do see aluminum in some applications nibble into copper," General Cable Corp. president and chief executive officer Gregory B. Kenny said during the company’s investor day presentations March 26.

"Right now, aluminum is two-thirds as electrically efficient and one-third the cost of copper," he said. "We’re not seeing a big move from copper to aluminum, but there is some nibbling on the edges, and aluminum is actually used in a lot of the developing world."

Economics plays a key role as companies choose between the two materials, he said.

"Aluminum trades at $1 a pound; copper is $3.44 (a pound) today. So (with) copper, (multiply) 700 million pounds of cost of goods sold times $3.44. It’s still the biggest piece of the company in those terms," Kenny said. "But in terms of just weight, we’re now at 50-50."

About half of the Highland Heights, Ky.-based copper, aluminum and fiber-optic wire and cable products company’s business faces a short price cycle, "meaning weekly or daily," he continued. "Long-cycle, you’re paid in the value-added (products). If you took the metal out, our margins on the work we do in the cable (business) are actually double-digit."

However, because copper has been so volatile—in 2009 alone, pricing fluctuated by more than $2 a pound, according to chief financial officer Brian J. Robinson—"it’s hard to explain it quarter to quarter," Kenny said.

"If we have inventory at $3.60 (a pound), and today copper is $3.43 or $3.44 (a pound), that’s a headwind, short-cycle," he added. But long-cycle, the company sells through that inventory, then buys at the lower price, he said.

Regarding material choices, General Cable studied the ratio of aluminum to copper in feeder cable, a heavy cable used in commercial buildings. "Because that’s a place where the specifying engineer can make a trade and still meet code, aluminum is growing (vs. copper)," Kenny said.

In motor vehicles, "the number of multiplexers inside a car and then the amount of work that’s going on in terms of signaling is huge, so (there are) lots of places to play in terms of either copper vs. aluminum, and then in data bus cables and (anti-lock braking system) cables and on and on and on," said Kenny. "It rolls right into the hybrids and electric cars, all of which are heavy cable users. (The auto industry) is going to aluminum for weight. They’re also getting tremendous temperature ratings that they want (by using aluminum)."

General Cable purchased Alcan Cable North America and Alcan Cable China last year for a total of $185 million. It has owned Phelps Dodge International Corp., a copper wire and cable producer, since 2007.

"We (now) know aluminum as well as we know copper," said Kenny, adding that General Cable has incorporated ideas from "people at Alcan and Phelps Dodge that have made the whole company better."

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