Future demand: A worker walks towards the shaft at a copper mine in Superior, Arizona. Producers such as Freeport and Rio Tinto stand to benefit from a premium on the metal, while analysts warn it would be consumers who will have to pick up the tab. — Reuters
NEW YORK: The world’s biggest maker of copper cable is applauding President Donald Trump’s planned 50% tariff on the metal, saying it will bolster the American supply chain, with costs passed on to customers.
Italy’s Prysmian SpA, which last year shelled out US$4bil-plus to buy Texas-based Encore Wire Corp, is in regular contact with the administration ahead of the measure’s implementation on Aug 1, said Maria Cristina Bifulco, head of investor relations and sustainability.
Trump sparked chaos in metals markets last week by announcing the higher-than-expected copper tariff, the latest twist in a tumultuous period for industrial commodities.
Since February, when Trump declared “it’s time for copper to come home” and aired the potential for levies, global traders have sent record volumes of the metal to the United States to get ahead of the tariff.
Like the rest of the industry, Encore and its Milan-listed owner are waiting for details.
Still, given the “spirit is to protect and facilitate local business”, it’s expected to be applied to both semi-finished products like cable as well as raw metal, Bifulco said.
“We find the administration very open, very sensitive,” Bifulco said in an interview on Monday. “They understand the situation very well. So in this respect, we are positive.”
Prysmian, which churns out about 220,000 tonnes a year of cable at a sprawling facility outside of Dallas, said it stands to benefit from tariffs relative to competitors because it sources a larger part of its copper domestically, from Phoenix-based Freeport-McMoRan Inc, and is vertically integrated.
“This will further reinforce the leadership of the local players,” she said. “We are better placed than other players.”
Stakeholders in the industry are divided. Some said any meaningful increase in domestic production would take years and require additional incentives given how difficult and expensive it is to build and operate mines and plants in the United States.
Incumbent producers such as Freeport and Rio Tinto Group stand to benefit from a premium on US-made metal, while analysts warned it would be consumers who will have to pick up the tab.
Copper prices in the United States have surged ahead of the tariff.
So far, Encore has been able to pass those on, although strength of future demand remains to be seen.
Eventually, aluminum may be substituted for copper in some applications, Bifulco said.
“Since the final customer is the one paying the increase in prices, you need to make sure to carefully assess demand to make sure that it’s resilient enough,” she said.
While it’s too soon to start replacing what Prysmian does import from Latin America, logically that would come from refined scrap in arrangements similar to what the company has with German copper processor Aurubis AG, she added.
Prysmian has leaned on acquisitions for growth after being carved out of tire-maker Pirelli in 2005.
The company bought Encore Wire last year to boost its exposure to the low-voltage electrical applications on which data centres largely rely.
“Cables are becoming all of a sudden sexy,” Bifulco said. “We are at the centre of these electrification and digitalisation processes and the leader in our space. We are very busy.” — Bloomberg
