March 10 (Bloomberg) -- Copper demand in Europe is showing little sign of rebounding outside of Germany, according to KME Group SpA, which makes parts out of the metal for uses from architecture to medical equipment.
KME aims to reduce its reliance on Europe by boosting production and sales elsewhere, Chief Executive Officer Riccardo Garre said March 6 by telephone. The Florence, Italy-based unit of Intek Group SpA wants to raise the share of sales generated outside Europe to at least 30 percent in the next three to four years from about 20 percent now, he said.
“We don’t see a strong recovery” in Europe, Garre said. “Consumption is really low everywhere but in Germany, and that’s influencing, of course, the volumes of our products.”
Copper usage in Europe is set to climb 1.8 percent this year, Barclays Plc estimates. That compares with the 2013 gain of 0.5 percent reported by the International Copper Study Group. The euro-area economy will expand 1.1 percent this year after two annual contractions, estimates compiled by Bloomberg show. Germany ranks third globally among copper consumers after the U.S. and world leader China.
KME, which has origins dating to 1886, wants to be “less European and more global,” the CEO said. A new auto-parts joint venture in China’s Henan province will start production this year, he said. The company has 12 production sites in Europe and one in China, its website shows. Sales are “slightly better” in Europe than last year so far in 2014, according to Garre.
Production at KME of copper and copper-alloy products will stay at about 420,000 metric tons this year after falling 3.4 percent in 2013, Garre said. Output slumped 10 percent in 2012.
About 40 percent of KME’s copper products are sold to the building sector, compared with 14 percent used by the electrical and electronics industry, according to the company.
Copper for delivery in three months traded at $6,696.50 a ton by 1:46 p.m. on the London Metal Exchange. Prices slid 8.9 percent so far in 2014 after last year’s 7.2 percent retreat.
The premium added to copper prices in Europe almost doubled in the past year, according to Metal Bulletin data on Bloomberg. Higher refined-metal premiums and narrowed discounts for scrap are squeezing fabricators’ margins, Garre said.
KME historically used refined metal for half of its raw material and scrap for the rest, according to the CEO. Now refined copper accounts for a 60 percent share, “which is a lot of money,” he said. KME buys 80 percent of its cathodes, a form of refined metal, on an annual basis and purchases the rest on the spot market.
Products made by KME for the auto industry “are doing well,” Garre said. Demand from construction companies for plumbing tubes and roofing materials is “flat” and hurt by substitution as customers opt for materials including aluminum, according to the CEO.
“Substitution and the shrinking of volumes for roofing in Europe is impressive,” he said. “Visibility is very short in all sectors. Customers order what they need.”
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