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 Clubs Copper Man of the
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).
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 Clubs 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).
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 didnt have and a plant in Mexico," he
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, Chinas largest manufacturer of magnet
wire, in 2003. "During the recession in 2008 and 2009, they
didnt 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
its 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 dont know what
prices will be from one month to the next, it will be difficult
to price and sell products in the long term.
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 Tintos Bingham Canyon Mine in Utah (
amm.com, April 16).
"It does concern us
because without that production theres 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