“The wirerod market is in turmoil”
CEO of Gil Rod Shomal:

“The wirerod market is in turmoil”

Shifts in the price of cathode and wirerod are among major concerns of Iranian producers. These changes affect not only the market of wirerods, but also all products that depend on wirerods. But what other problems and challenges are producers facing? For this Insider Talk, we have invited Ahmad Oruji, CEO of Gil Rod Shomal.

What are some issues that wirerod producers are dealing with?

The National Iranian Copper Industries Co. (NICICO) produces 230 thousand tonnes of cathode annually, and total domestic production capacity of wirerods is 60 thousand tonnes. But domestic demand is far below those figures; there shouldn’t be any problems with wirerod production. However, wirerod supply has been disrupted due to policies on buying cathode defined by the Ministry of Industry, Mine and Trade; any company with a stock code can buy cathode, even if they are not related to the industry. Demand for cathode went up 19%-25%. What annoys producers is such policies and regulations implemented without their consultation.

Are wirerod producers supported by the government?

The production of wirerod does not ask for any support from the government because all raw materials are supplied domestically through the stock exchange with absolute clarity. All we need is the government stop disrupting the supply-demand balance by implementing tactless policies. If the natural flow of the market is not upset, there won’t be any problems in the industry and producers of wires and cables will not have any issues with the availability of wirerod.

What are some factors that influence the sale of wirerods in the market?

Over the past few years, wirerod consumption has been about 120-130 thousand tonnes. That is unlikely to change unless there is economic growth, infrastructure projects are implemented, or contracts are signed with foreign companies. There are no other ways for pushing the production of wirerod, and I believe consumption will not change much. But the export of products from wirerod as well as the difference between the NIMA rate and the actual dollar rate will drive export and sales of wirerod, but it will not be a significant change in the country’s industrial development. Over the past few years, sales of copper wirerod have declined due to economic recession, debts of the Ministry of Energy to cable producers, and a lack of construction projects.

Can producers of other copper products also produce wirerods?

The major part of domestic industrial demand is met by three companies. Their products are on a par with global standards, which means they are of such a high quality as to be exportable. The output of two of these companies is of outstanding quality, while that of the other one is good enough for producing wires and cables but not winding wires and transformers. The production process of other types of copper rods, bars, and sections is totally different from wirerods; such companies cannot produce 8mm wirerods with the machinery they already have. They will have to employ additional technology and machinery, because 8mm wirerod is produced through continuous casting.

Are wirerods used in applications other than electrical purposes?

Wirerods are principally used in electrical applications. To produce wires and cables, 8mm wirerods are converted into smaller sections as needed, which are then insulated as solid or stranded cables. They are also used to produce winding wire with round or flat cross-sections insulated with lacquer. A small part of wirerods is used in packaging.

Can wirerods be produced from scrap?

Yes, scrap can easily be used to produce wirerods. Gil Rod uses 100 tonnes of scrap daily. After being refined to 99.96% purity, scrap can be used for electrical purposes without any conductivity issues. The quality of wirerods produced from scrap is almost the same as those produced from cathode.

Does Iran import copper wirerods?

Importing wirerods is not economical due to customs duties. Moreover, the global prices of wirerods as well as costs of shipping and transportation are too much. What’s more, the country’s production capacity exceeds domestic demand and consumption.

Is wirerod exported?

Yes, we exported wirerods to India, Iraq, Afghanistan, and the UAE in 2017. But an export permit is required. We got a permit to export 500 tonnes of wirerod in February. We have sent samples to Italy; export will be confirmed once the samples are approved. Due to the expensive nature of copper, there are some issues with export and transactions. Cash payment can take as long as 45 days. Owing to preferential tariffs between EU members, they are reluctant to trade anything with non-EU countries. The 4.8% tariff on Iranian goods makes it practically impossible to compete.

How is quality affected by technology?

The quality of end products is determined by production technology. Our wirerod is unique owing to high-tech machinery used in the process.

What do you think the future of the wirerod market looks like?

The price of copper wirerod is determined by the dollar index and the price of copper in the LME. Consumption growth is very unlikely in Iran; I think it will remain between 120-140 thousand tonnes in 2019.

What is your production capacity?

Gil Rod Shomal can produce 76.5 thousand tonnes; provided there are no problems with the customs clearance of machinery, our Line 2 will be launched in July to extend our capacity to 150 thousand tonnes per year. We produced 45 thousand tonnes in 2018, which is far below our capacity.

What do you have to do to be distinguished in the market?

What sets brands apart and helps boost sales is their capacity, quality, and their interaction with the market.

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