Cable and wire makers raise prices by 10% in two weeks

Copper, the major raw material, has seen a sharp increase in its prices over the last five weeks

Don't want to miss the best from Business Standard?

At a time when demonetisation of high-value currency notes lowered demand by over 25-30%, wire and cable manufacturers have raised their products' prices by over 10% in the last two weeks to pass on the surge in raw material.

Copper, the major raw material used for manufacturing of wires and cables, has seen a sharp increase in its prices over the last five weeks. After hitting the recent low of $4,619 a tonne on the benchmark London Metal Exchange (LME), copper price jumped to hit the recent high of $5,900 a tonne. A marginal profit booking, however, pulled copper price down to trade currently at $5,876 a tonne on the LME.

Copper comprises 60% of the raw material requirement for wire and cable manufacturers and hence, its price movement directly affects their margins. To retain their production margins, therefore, cable manufacturers revised products' prices frequently.

"The prices in metals have been rising on the LME. As per our normal practice, we pass on the increase or decrease in costs to our customers with a slight time lag. Similarly, for the increase in copper prices , we have passed on these costs by increasing our wire prices twice by 5% each in the last 15 days," said Deepak Chhabria, Managing Director, Finolex Cables Ltd, one of India's largest cable manufacturers.

Indian primary and secondary copper manufacturers including Hindustan Copper, Sterlite Industries and Hindalco Industries, normally follow LME price for selling their output to users. Hence, the price of raw material i.e. copper is revised at the time of purchase by consumers.

In fact, sharp variations in copper prices have forced user industries to revise their products' prices frequently without any lag for absorbing even the minor variations. In fact, many wire and cable manufacturers have decided to revise their products prices on daily basis with the revision in the raw material prices.

Confirming similar move, a senior official of Vadodara-based Diamond Cables Ltd, said, "we have changed our product pricing methodology on daily basis instead of periodically earlier. We have also raised prices of our products in tune with the increase in copper prices."

Meanwhile, data compiled by the global agency International Copper Study Group (ICSG) indicate that the copper market should remain essentially balanced. While in 2017, ICSG forecasts a surplus of around 160,000 tonnes as against a deficit of 55,000 tonnes for 2016. Upward revisions have been made for both production and usage in view of better than expected actual growth so far this year.

Meanwhile, demonetisation of Rs 500 and Rs 1,000 currency notes as announced on November 8 has affected demand for wires and cables.

"Finolex Cables sells wire to the real estate sector through a retail network of channel partners and dealers as well as direct sales to builders in rural India. Hence, retail sales in the secondary market are slightly affected and any pressure on real estate sector in future months will affect our wire demand.

We are a well diversified company with sales of power cables, coaxial cables, LAN cables, CCTV, fiber optic, flexibles, auto cables, winding wires for pump industry, switches, lighting, low voltage switchgear, fans, water heaters, etc. Hence, any reduction in demand from real estate sector will only have some effect on our sales," said Chhabria.