Japan Makers to Improve Profitability for Construction Cables

Japanese major electric cable makers try to improve profitability for their construction cable businesses. They will raise the cable selling price, except the effect of copper metal price fluctuation, by average 5% within fiscal 2007 ending March 2008 to gain better margins. The makers are suffered from less margins and worse profitability of construction cables when Japanese domestic copper price stays at historically high level around 1 million yen per tonne since April 2007.

Sumiden Hitachi Cable (HS&T), a sales joint venture of construction cables among Sumitomo Electric Industries, Hitachi Cable and Tatsuta Electric Wire & Cable, plans to raise the selling price by 4-5% within fiscal 2007 and Fujikura Dia Cable (FDC), a construction cable sales JV between Fujikura and Mitsubishi Cable Industries, targets 5-6% hike within fiscal 2007. Furukawa Elecom, a sales subsidiary mainly for construction cables in Furukawa Electric Group, aims to increase the selling price by 5-6% during the first half of fiscal 2007.

Each of HS&T, FDC and Furukawa Elecom calculates a profit sum between the parent companies’ productive sections and their sales sections as a total index for a construction cable business. The 3 sales companies have been suffered from loss accounts in the indexes and their profitability became even worse in April-June 2007.Japanese price system for construction cables has a structural defect along which the larger sales margins are reduced the higher copper metal price becomes. The basic review of the price system is difficult because the system is widely adopted by the cable customers such as electric contractors.

Domestic cable makers cannot improve their profitability but by price hike under the existent system. The profitability is especially low for CV (cross-linked polyethylene polyvinyl chloride or PVC cable), IV (indoor PVC cable) and CVV (control PVC cable) which consumes copper metal largely.