Ailing Japan Electric Wire Industry with Lower Copper Price

Japanese major construction electric wire makers try to keep profitable by keeping the margin even after the domestic official copper ingot price plunged by 90,000 yen per tonne in earlier the month. They try to increase the margin by around 5% by the end of fiscal 2006 ending March 2007. The electric wire spot market price plunged from late December due to drop of copper ingot price. The wholesale dealers’ selling price is 1,100-1,140 yen per meter for 3-core 600 volt CVT (triplex type of cross-linked polyethylene insulated and vinyl sheathed cable) with 38 square millimeters of copper cross section, which decreased by around 100 yen fro late December. The price of 2-core 600V VVF (vinyl insulated vinyl sheathed flat-type cable) with 1.6 mm diameter decreased by 1-2 yen and could decrease more to less than 40 yen.The makers have inventory and order backlog based on 800,000-900,000 yen per tonne of copper ingot price. The lower copper ingot price should suffer the makers in the valuation loss. A source from sales force of a major maker said the firm couldn’t make money for the year to March 2007. They could take 1-2 months to clear the higher priced inventory. However, the electric wire price drop is only due to lower copper ingot price. Major electric wire makers and the distributors still keep the margin. If they would reduce the margin, the market price could collapse under the bear market. The supply side players try to improve the margin for healthy profitability in longer term. However, with the expectation for lower copper ingot price, they could have trouble even to keep the margin.