Conditions of Copper Industry in 2002
Of all the materials used by man, copper has been the oldest and very important. What make copper a material of choice are the outstanding characteristics, such as its excellent conductivity (after silver) of heat and electricity, corrosion resistance, ductility and malleability, ability to be well-alloyed with other metals, including ability to recycle. Result from these characteristics, copper has played, and continues to play a vital role in contributing to related industries including electrical and electronics industry constituting 50% of total copper consumption volume nationwide. Examples of copper-material products are electric wire, electronics circuit board, electrical motor, communicating devices, and so on. Copper can be used in machinery industry such as valves used in factory and pipes for heater and cooling systems, casting industry, production of motor car parts, electric wires, coins, and construction industry, etc. Copper consumption classified by region in 2000 has presented below.
Source: The International Cooper Study Group (ICSG), 2000
From the graph presented above, cultures of copper consumption in individual regions are different. Europe and United States have mostly used copper in construction industry such as roof-building because of the durability against climate change, and casting of sculptures such as Statue of Liberty consisting of 179,000 pounds of copper or 81,194 kilograms.
Current Conditions
1.Production
Copper industry can be classified into 3 production types.
1.1Primary production consists of several stages refining copper content from ore or bringing used copper scrap to re-melt. Once copper has been re-melted, it can be turned into pure copper cathode, which is the primary raw material that can be processed into needed figures by related industries.
1.2Intermediated production is bringing copper cathodes to process into needed figures as follows.
Wire rod is a circle coil with ½ inch diameter and can be shorten into needed size.
Billet is a lump with 8 inches diameter and can be processed further into smaller size of tube, rod and bar.
Cake or slapis a piece with 8 inches wide and 28 inches long and can be further hot or cold rolled into plate, sheet, strip and foil at needed size.
Ingot is a copper chunk that is mostly used in alloy casting processes.
1.3Final production consists of bringing semi-finished copper such as wire, sheet and tube to be produced into finished goods to consumers.
Production processes of full-cycled copper industry are presented below:
Source: The Copper Development Association.
The U.S., Chili, Japan and China have been the leading copper manufacturers of the world. The quantities produced in these countries are 1.7 million tons, 1.4 million tons, 1.3 million tons and 1 million tons, respectively.[1] Most copper productions in Thailand are intermediated and final productionsdue to lack of copper ore source to produce pure copper. Therefore, most copper productions are for serving and supporting domestic ending industries such as copper and brass pipes, electric wire factories, and foundry, using imported unformed copper materials. Thailand would establish one copper cathodes factory named Thai Copper Industry Public Company Limited. It would start the operation in April 2004.
Production Problems
Most production problems are the technology limitations and outdated tools that most copper factories have used, and operational workers lack the academic knowledge. As a result, the domestic production has produced low quality products and unavoidable defects to rework causing high production costs. In addition, another problem is trade barrier of large foreign companies based in Thailand which frequently order copper materials from their affiliated companies or companies from the same countries so Thai entrepreneurs have faced severe problems in raw material purchasing andselling in domestic markets. Moreover, there is a dynamic change of global prices of copper depending on price mechanism. All these factors cause Thai entrepreneurs to confront with high cost conditions and pricing problems and they have to compete with each other in low markets.
2.Marketing
2.1Domestic Market
The consumption volume of copper products in 2002 is 225,221 tons increasing from 181,538 tons of 2001, or increased by 24.06%. The need of copper products in related industries continues to increase, as seen in many products that have copper as raw material in electrical appliance industry. Such products are refrigerator, motor, transformer, electric wire, transistor and diode, etc.
2.2Foreign Market
Import
Table 1: Comparison of import quantity of copper in 2001 and 2002
Quantity: Metric tons
Value: Million Baht
Products / 2000 / 2001 / 2002 / % Changing rate / Important import sourceQTY / Value / QTY / Value / QTY / Value / QTY / Value
Copper Matte and Cement / 0 / 0 / 15 / 3 / 176 / 3 / 1073 / 0 / Singapore, Japan
Scrap / 4,358 / 247 / 4,210 / 287 / 4,245 / 208 / 0.83 / -27.5 / U.S., Canada
Unwrought, Cathode, Billet / 159,067 / 11,990 / 175,331 / 13,693 / 195,465 / 14,153 / 11.48 / 3.36 / Zambia, Australia, Indonesia
Powders & Flakes / 570 / 79 / 450 / 80 / 559 / 101 / 24.22 / 26.25 / Japan, U.S., UK
Bars, Rods, Profiles / 3,759 / 488 / 4,074 / 513 / 6,202 / 692 / 52.23 / 34.89 / Japan
Copper Wire / 28,799 / 2,809 / 26,680 / 2,632 / 36,362 / 2,837 / 36.28 / 7.78 / Korea, Taiwan
Plates, Sheets, Strip / 19,875 / 3,470 / 18,170 / 3,968 / 26,365 / 3,956 / 45.10 / -.030 / Japan, Taiwan
Foil / 14,110 / 3,331 / 12,102 / 2,826 / 14,154 / 2,881 / 16.95 / 1.94 / Japan, Taiwan
Tubes, Pipes, Fittings / 8,453 / 1,403 / 10,585 / 1,863 / 9,619 / 1,649 / -9.12 / -11.48 / Malaysia, Japan
Total
/ 238,991 / 23,817 / 251,617 / 25,865 / 293,147 / 26,480 / 16.50 / 2.37 / Japan, Indonesia, Australia, TaiwanSource: 1.Bureau of Primary Industries, Department of Primary Industries and Mines
2.Customs Department
From the table presented above, the import quantity of copper as a whole in 2002 comparing to 2001 has increased by 41,530 metric tons or 615 million baht. Most imported coppers are unwrought, copper wire and sheets in line with the increase in production of products in electrical industry using such copper products as raw materials. The important import sources are Japan, Indonesia, Australia and Taiwan constituting 25%, 11.33%, 10.62% and 9.4% of total import quantity, respectively. The copper recycle campaign might be significant and necessary for the industry because of the ability to lower costs and reduce imported quantity of copper, as seen from the U.S., the world’s leading copper producer, copper scrap recycling has constituted 45% of total copper used in U.S.
Export
Table 2: Comparison of export quantity of copper in 2001 and 2002
Quantity: Metric tons
Value: Million Baht
Products / 2000 / 2001 / 2002 / % Changing rate / Important export sourceQTY / Value / QTY / Value / QTY / Value / QTY / Value
Copper Matte and Cement / 39 / 2 / 37 / 3 / - / - / -100 / -100 / Burma
Scrap / 18,446 / 1,034 / 26,942 / 1,121 / 22,449 / 1,251 / -16.67 / 11.59 / Japan, Taiwan, Singapore
Unwrought, Cathode, Billet / 2,164 / 116 / 394 / 29 / 181 / 20 / -54.06 / -31.03 / Japan, China
Powders & Flakes / 181 / 13 / 35 / 9 / 50 / 11 / 42.86 / 22.22 / Taiwan, Dominican Republic
Bars, Rods, Profiles / 8,880 / 892 / 10,806 / 1,163 / 9,812 / 907 / -9.20 / -22.01 / Taiwan, Malaysia
Copper Wire / 5,252 / 693 / 2,243 / 273 / 571 / 163 / -74.54 / -40.29 / Burma, Japan
Plates, Sheets, Strip / 1,467 / 209 / 898 / 105 / 1,812 / 141 / 101.78 / 34.28 / Malaysia, Japan
Foil / 9,005 / 2,261 / 6,944 / 1,117 / 7,862 / 983 / 13.22 / -11.99 / China, Japan
Tubes, Pipes, Fittings / 19,688 / 2,313 / 21,779 / 3,176 / 25,189 / 3,678 / 15.65 / 15.81 / U.S., Japan
Total / 65,122 / 7,533 / 70,078 / 6,996 / 67,926 / 7,154 / -3.07 / 2.26 / Japan, U.S.
Source: 1.Bureau of Primary Industries, Department of Primary Industries and Mines
2.Customs Department
From the table presented above, the export quantity of copper as a whole in 2002 comparing to 2001 has decreased by 2,152 metric tons, the export value has increased by 158 million baht though. Due to increased domestic demand and trade barriers from foreign countries, the export quantity of all tubes, pipes and fittings has decreased. Although the export quantity of copper scrap has decreased, the export value has increased indicating that demand of copper scrap in foreign markets is high, so the price is high as well according to price mechanism. Export value of tubes, pipes and fittings is good as of 51.41% of total export value. The important export markets are U.S. and Japan constituting 20.70% and 20.27% of total export quantity, respectively.
3.Summary
In 2002 the production in copper industry has increased. The import quantity of unwrought copper used as basic raw material in the copper industry is 195,465 metric tons increasing by 11.48% compared to 175,331 metric tons of 2001. Such unwrought copper is further processed to use in the related industries such as electrical industry, motor vehicle parts industry, etc. Especially, the growth of electrical appliance industry in 2002 is at good level compared to 2001. There is an increasing production of many products such as refrigerator, TV sets, electric wire, etc. In addition, metal casting industry such as brass (copper and zinc), and bronze (copper and other alloying metal such as tin, aluminum, silicon, etc.) also has an increasing production, indicating that demand of copper is at good level and it is a primary and necessary metal of choice. However, the entrepreneurs should extremely concern about the analysis of weakness and obstacle of the industry by raising the questions such as ‘Are the problems originated from operational procedure or production process?’, ‘Do the production processes have so much limitation that lower the product quality?’, ‘Have the downtime occurred from repairing the machine?’, ‘Do we have many defective products that need to be reworked?’, etc. If the entrepreneurs can solve these problems, the cost reduction program will be successful. Lowering cost from buying low quality materials or equipments is not a good decision because the finished products would be unacceptable and in low quality.
Therefore, the potential improvement, value adding to the products with lower cost, and increase of competitiveness in order to cope with more fierce competition in world market would be required. Furthermore, the clear study of trade barriers in each relevant foreign country and assessment of potential effects from free trade area policies in order to determine the defensive and offensive strategies of the companies would be equally important as well. This could increase the domestic market because the related industries have moved their production bases to Thailand and opportunities to compete with foreign markets both in short and long runs could be increased also.
Suggested policies that government should use to encourage the improvement of copper industry:
1.1% import duty of primary materials such as unwrought or copper cathode with the customs HS-code of 7403.11, which is effective until December 31, 2003 and would be changed to 6% on January 1, 2004, should remain at 1% as usual. Although in mid of 2004 Thailand would have the smeltery that can produce copper cathode, the production volume would not be enough for the domestic demand so the entrepreneurs need to import copper cathode. Therefore, freezing 1% customs duty as usual might abate the rising production cost.
2.The government should sponsor the studies of linkage between the industry and related industries focusing on educating and providing knowledge and information to entrepreneurs in order that they could have more linkage between industrial sectors and networks such as electrical industry. In addition, government should support the technology improvement or best practice operation implementation in order to increase productivity and reduce production cost. Planning of copper scrap recycling to use in the industry and increase the use of recycled copper is one of the cost reduction methods and also trims down the import quantity of copper.
3. Gathering entrepreneurs’ cooperation into power groups could increase the bargaining power in materials buying and improve production processes by integrating all primary, intermediated and final productions in order to benefit from materials procurement, product quality control, environment preservation, research for technology improvement and also set the framework of local content implementation to give the advantage to Thai entrepreneurs.
4.Trend
In 2003, it is expected that copper industry would continue to grow favorably with the constant growth in copper tubes, pipes and fittings used in heater and cooling systems, including copper wire used in electrical appliance industry and motor vehicle industry. In addition, expansion of infrastructure such as electrical system and telecommunication network would result in a greatly increasing demand for copper, so the import quantity of unwrought copper might be at continuously high level and more. Moreover, the economic recovery would stimulate the related industries to increase their capacity and need more copper materials.
Mr. Danuruj Winmun
Industrial Sector 2, Sectoral Industry Policy Bureau 1
Office of Industrial Economics
July 2003
[1]Source: Europe: International Wrought Copper Council; Japan: World Bureau of Metal Statistics; United Sates: Copper Development Association, Inc. 1997.