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Isola: Evolving with the Market
December 26, 2017 | Barry Matties, I-Connect007Estimated reading time: 13 minutes
Stollenwerk: They were more focused on their market, and their problems, and their needs. So, in general, they are happy to see that we are still focused on the three regions. They're happy that in Europe we are really focused on being the number one, in terms of short lead times and providing a QTA service within 12 to 48 hours. Big turnarounds.
Matties: The lead time is still a big issue for some of the high-frequency work.
Stollenwerk: This year, the lead time was even more critical, because we have had some issues with copper foil availability. Last year, in the third quarter of 2016, we saw some issues in Asia with cost increases that we were not having here in Europe. We were able to keep the cost level up to end of 2016, which was also a good signal to our customers, and to all our markets, that we were reliable.
In November 2016, during electronica, we started to inform the market of price increases, and also some issues with availability. But we said, “Don't panic. Don't put too much in your inventory. Just let us know what you need, and you will get what you need.” We were then starting to run six days a week, not five days, so it meant 20% more volume. We were able to get the copper foil for this increased volume. We were serving the market when it came to the hot season, and we were able to achieve six days of output. This lasted for eight months, up to end of August; we were running six days a week, three shifts, without any issues of not having the cooper foil in general. In some cases, we didn't have the right copper foil at the right day. Therefore, the lead time was a little longer, but the customers weren't panicking too much.
Matties: There's a lot of concern about copper foil in the marketplace now. Other industries will consume it without such high standards, and it's favorable for a copper foil producer to sell it that way.
Stollenwerk: In my opinion, the copper foil market was also taking it in that direction. The people were more than nervous about it, and it worked in the way that they were increasing prices. Not just to LME (London Metal Exchange), which you can see on the stock exchange, but with their conversion cost. We also have to accept that the conversion cost of their margins were very low over the years. It was the reason that we lost copper foil suppliers in Europe.
Germany in 2014, was like 2009 in France. We had also to consider that if you have suppliers that are not earning money, sooner or later they will not survive. And 2017 was the year where the copper foil suppliers were using the new markets, and being a new market themselves, which is less demanding from a quality point of view, than from the electronic side. But, from our point of view, we were able to bring all the volume, so customers were not missing anything. They could produce what they wanted to produce.
That is the message, what we as a European supplier were able to bring. Looking to the future, I see it a little differently. The LME price is still going up a little bit, but I don't see a similar situation for 2018, in terms of shortages. Now, we are back to normal, but the continuous growth in E-mobility will for sure bring additional demand for ED copper foil.
Matties: Well, people are still talking about this. If there's going to be shortage, we're going to see price increases. That's still conversation, but you're saying you see it a bit differently.
Stollenwerk: From the price point of view, I would say there will be a price increase, but not a big one.
Matties: Not a 30% increase.
Stollenwerk: Not as we have had—for sure not, but it's more related to what's going on, on the LME. Here in Europe, it’s a little bit more complicated, because our supplier buys LME in dollars, and we buy the copper foil in Euros. That is a different additional advantage, or disadvantage. But, I would say, from the shortage point of view, it's gone. In Q4 2017, we didn't have any issues anymore. I would not see that this will come very quick again. On the other two raw material sectors, like glass cloth, we have also had issues. During Q1 and 2, 2017 there were some sort of shortages. Not as big as copper foil. But if the industry brings five furnaces at that same time into repairs, then there must be an inference. But we were not seeing the same issues then on the copper foil. What I see for the near future is that there will not be a big issue on that, in terms of availability, maybe here and there some price increases. But not in a real big number.
Matties: What sort of demands do your customers bring to you now?
Stollenwerk: The demand is much lower in Q3 and Q4 than in the first half of 2017. I would say at the end of the year, we would have an increase in volume of roughly 10%.
Andy Shaughnessy: Karl, how do the market segments break down for Europe, your side versus U.S.?
Stollenwerk: In Europe, 50% is industrial, 20% is automotive, then another 15% is health, and then medical. Then I would say the rest is in aerospace, and in other services. The military and aerospace market in the U.S. is much larger than in Europe.
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