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Copper use will fall with switch to aluminum

Keywords: Tags  Jim Vann, Rea, Copper Club, copper, Ankh Award, everdeen mason


NEW YORK — Copper consumption will decline going forward as the price differential between the red metal and aluminum continues to encourage substitution, according to Jim Vann, Rea Magnet Wire Co. president and the Copper Club’s Copper Man of the Year.

In the 31 years Vann has been president of the Fort Wayne, Ind.-based company, one of the biggest changes has been the gradual increase in the production of aluminum magnet wire, he told AMM. "One of our motor wire plants used to run about 10 percent aluminum wire. Now it runs about 40 percent."

Vann attributed the change to copper prices increasing an average of 8.5 percent annually since the 1980s while aluminum prices have remained low. The July Comex copper contract closed at $3.185 per pound June 13, while the cash aluminum price on the London Metal Exchange ended the official session at $1,813 per tonne (82.2 cents per pound).

"Historically, about 80 percent of copper produced is in wire product," Vann said. "That will drop off because of the price compared to aluminum." There are some new areas of demand for copper wire, including the transformer industry, but he said it would not be enough to offset the damage caused by the price differential.

Vann was awarded the 2013 Ankh Award at the Copper Club’s annual dinner in New York, recognizing his 63-year service in the copper industry and his transformation of Rea into a "leading company in the magnet wire business" (amm.com, May 3).

Rea’s success took off in 1986, when Vann arranged the purchase of the company from Pittsburgh-based Alcoa Inc. "It was the highlight of my career, but it was my greatest challenge to make those plans and put it into place," he said, giving a lot of credit to former Alcoa chairman and president Fred Federoff for helping to facilitate the purchase.

Vann set off on a path to make Rea a global giant. He said that originally there was no strategic plan for growth, but when presented with the opportunity to acquire Fort Wayne, Ind.-based Phelps Dodge Magnet Wire Co. in 2006 he went for it. "(We realized) it would double the size of Rea and give us a position in the marketplace we didn’t have and a plant in Mexico," he said.

The acquisition changed how Rea was operated, and Vann made more plans to grow the company. These came to fruition with its joint venture with Tongling Jingda, China’s largest manufacturer of magnet wire, in 2003. "During the recession in 2008 and 2009, they didn’t have that recession in China," Vann said of Jingda-Rea. "They were still going so we were still making a return in China on our investment."

Working in China has diversified the company and also helped Vann understand the most efficient ways to use technology and equipment to run operations in the United States and China, reducing scrap and increasing production, he said.

Vann said he has seen many changes in the industry, including the switch to aluminum, the increase in copper prices and the consolidation of the industry. He continues to focus on how changes in the industry will affect his customers.

One such concern for Vann is the impact of the forthcoming exchange-traded funds (ETFs). Copper consumers recently failed in their attempt to block the launch of copper-backed ETFs by JPMorgan Chase & Co. and Blackrock Inc. (amm.com, April 10).

While Vann said it’s too early to know exactly what could happen, he believes it will create further volatility in a market this is already facing challenges from high copper prices. The danger of more volatility is that if customers don’t know what prices will be from one month to the next, it will be difficult to price and sell products in the long term.

Rea’s customers also are affected by production disruptions, including the force majeure declaration following a fatal accident at Freeport-McMoRan Copper & Gold Inc.’s Grasberg Mine in Indonesia (amm.com, June 12) and a wall slide at London-based Rio Tinto’s Bingham Canyon Mine in Utah (amm.com, April 16).

"It does concern us because without that production there’s a tight supply of cathode," Vann said, adding that he believes copper prices will continue to rise despite a slight drop in Comex prices this week.


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