Editor's Note: A correction on this story ran in the April 2010 issue of Electrical Wholesaling

What's up with wire? That's the question Electrical Wholesaling's editors asked executives throughout the wire and cable industry. At least two of the most-common points of discussion would come as no surprise to any electrical manufacturer, distributor or independent manufacturers' rep who has ever sold a reel of wire and cable: wild fluctuations in copper pricing and industry consolidation. But at least some manufacturers were eagerly peering into the future at new market opportunities with the potential to revolutionize a proud market that's been searching for new sources of profits for years: the rebuilding of the global electrical grid and utility-scale photovoltaic installations and wind farms. This article will offer some insight into the latest thinking on how these industry trends may impact the wire and cable industry.

The recent earthquakes in Chile, the world's largest cooper producer (accounting for more than one-third of total global copper production), reinforced just how jittery the copper market can be. When the markets first opened on March 1, two days after the earthquake shut down power to several Chilean copper mines, copper pricing spiked six cents per pound. It settled down later in the day, when reports started popping up on the Web that power had been restored and that the mines didn't sustain any permanent damage. Said one wire specialist, “The earthquake in Chile really rattled everyone's cage.”

Wire companies will still be watching the situation in Chile closely. The earthquake initially was thought to have impacted approximately 20% of the country's copper capacity, which caused “a short-term panic on London copper markets,” according to a March 2 article in the Malyasian Sun that was picked up at www.kitco.com, However, a day later one London-based metals trader said in a Business Report news brief also picked up on www.kitco.com that the March 1 spike was “a knee-jerk reaction,” caused by some traders and investors taking profits.

While several sources contacted for this article were hesitant to peg an average price for copper as we go further into 2010, one said several months ago major wire and cable manufacturers set their 2010 budgets with $2.75 per pound as a price point. That's slightly higher than the $2.50 per pound that John Mothersole, principal, industry practices, Global Insight, and one of the nation's leading experts on metals pricing, forecast for copper back in fourth-quarter 2009. Other industry insiders were uncomfortable forecasting pricing too far out. “It's so speculative right now,” said one wire executive who requested anonymity. “It doesn't seem like the recent increase was supported by any particular type of demand.”

Another factor that may soon play a role in any copper pricing forecasts might be inflation. Alan Beaulieu, president, Institute for Trend Research, Bascawen, N.H., expects inflation to hit 6.5 percent in 2011 — and that its early harbingers will be increases in metals pricing. Whatever the price of a pound of copper, this metal has a direct impact on the bottom line of every company that sells it.

The wire and cable industry has been shaped by wave after wave of consolidation for the past 30 years, but the deals done during the past decade have been particularly notable (see sidebar on page 20). It doesn't seem all that long ago that the wire and cable industry had a handful of publicly owned wire giants and dozens of family owned wire companies with product, regional or customer specialties. Many of these family owned businesses have sold out to one of the wire giants or gone out of business. Today, privately held Southwire, Carrollton, Ga.; and the publicly held companies like General Cable Co., Highland Heights, Ky.; Coleman Cable Inc., Waukegan, Ill.; and Encore Wire Corp., McKinney, Texas; rank among the largest manufacturers, and Anixter Inc., Skokie, Ill.; Houston Wire & Cable, Houston; Omni Cable Corp., West Chester, Pa.; Priority Wire & Cable, North Little Rock, Ark.; and Industrial Electric Wire & Cable, New Berlin, Wis.; are the specialty wire distributors with more than $100 million in sales.

The building wire market has probably seen the most consolidation. After the Southwire acquired the building wire operations of Essex and General Cable, the largest remaining independent players in building wire include Encore Wire; Colonial Wire and Cable Co. Inc., Hauppauge, N.Y.; CME Wire and Cable Inc., a subsidiary of Conductores Monterrey, a Mexican manufacturer of wire and cable products; United Copper Industries, Denton, Texas; and Marmon Group Inc., Chicago.

As you can see in the list of acquisitions over the past decade, one of the common themes is the globalization of the wire and cable business. Comments from Gregory Kenny, president and CEO of General Cable, accompanying the company's recent fourth-quarter earnings statement clearly define the global nature of today's wire and cable business. Said Kenny in the press release, “Two areas of strength during the quarter were Venezuela and France. Our businesses in these countries have benefited from governmental investment in energy infrastructure and grid reinforcement.”

If or when the smart grid becomes a reality, it will require a massive upgrade of the U.S. electrical grid and its estimated 157,000 miles of high-voltage electric transmission lines. That's enough cable to wrap around the earth about six times, and if all of it needed to be replaced, it would make for one heck of a wire order. Wikipedia defines the smart grid as the ability to “deliver electricity from suppliers to consumers using two-way digital technology to control appliances at consumers' homes to save energy, reduce cost and increase reliability and transparency.”

The smart grid may one day utilize superconductors to transmit more voltage at far less power loss, and link green power produced in remote areas such as California's Mojave Desert or the wind belt in the Midwest to the geographic areas that need more power. On a much more local scale, the smart grid would enable home owners to monitor when electricity costs are least expensive, and shift some of their energy usage to those times, such as running a dishwasher or doing a load of wash.

Duke Energy, Charlotte, N.C., is aggressively moving into this arena. Last year, it announced plans to convert its entire Midwest and Carolinas electricity delivery system — which serves approximately 11 million people — into an advanced, state-of-the-art smart grid over the next several years. One of the first steps in this massive project, currently underway, is the installation of 700,000 new electric smart meters in Ohio. Some big dollars are earmarked for the smart grid.

According to information on the website of the National Electrical Manufacturers Association (NEMA), Rosslyn, Va., $3.4 billion in grant awards are part of the American Reinvestment and Recovery Act (ARRA), and will be matched by industry funding for a total public-private investment worth over $8 billion. However, federal spending on necessary updates to U.S. utility infrastructure is apparently slow in coming. General Cable's Kenny said in a press statement accompanying the corporation's fourth-quarter earning report that, “spending by electric utilities in the United States continues to be a drag on our performance as a result of ineffective government policies, delays in projects to support grid reinforcement and alternative energy generation, as well as the impact of lower electricity usage by the industrial base for the last two years.”

The sheer scale of the U.S. electrical grid would imply that most if not all of the miles of high-voltage transmission cable needed in this massive project will be sold directly from manufacturers to utilities. However, distributors and reps should still keep tabs on the involvement of their local utilities in smart grid endeavors.

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