Wire and Cable - Q4 2019 Update

China, which accounts for 35% of global consumption, will grow at a historical low of 1.6% y/y in 2019, this is predominantly in response to the sharp downturn in the automotive industry and low electricity grid investment. Furthermore, India’s general economic weakness, combined with a contraction in automotive production, has further pushed down our demand forecast. In Europe, cable demand is expected to decline in 2019 led by a sharp fall in Germany, again in response to a strong contraction in the automotive sector. Meanwhile, the North American market has also weakened amid a more bearish view of US economic growth.

The above considerations, combined with further concerns surrounding global economic health, have made our 2020 outlook more bearish. CRU no longer expects a strong 2020 rebound, but instead we forecast cable demand to grow by just 1-2% y/y in conductor tonnes.

Beyond this, CRU remains optimistic about mid-term growth in cable demand. We expect a healthy CAGR in insulated metallic wire and cable demand between 2019 and 2024. Our estimate is roughly equivalent to the growth rate between 2014 and 2019, highlighting the overall stability of this industry, despite near-term fluctuations. We believe that ongoing construction, utility and industrial investment in emerging economies such as in India, the ASEAN region and the African continent provide significant upside potential for insulated metallic wire and cable demand, at least over the five-year forecast period.

Regarding CRU’s raw material price outlook, Copper, aluminium and Brent crude are all forecast to depreciate y/y in 2020: LME 3-month copper by 1.3%, LME 3-month aluminium by 6.2% and Europe Brent crude by 1.6%.

Optical Fibre: further weakness on the horizon for China

As part of CRU’s Q4 2019 update to our Telecom Cables Market Outlook, we have lowered our forecast for global optical cable demand this year by 7 million fibre-km when compared to our August update. CRU is cutting its 2019 guidance to 477 million fibre-km. The reason for this reduced outlook is new information regarding demand in India, Europe and the US, where demand seems to have slowed noticeably as H2 progressed.

Amongst the biggest downgrades to our 2019 estimate, India ranks number one. Since August, deployments and orders at the country’s largest carriers have fallen dramatically. Burdened by elevated debt-levels and falling ARPU, the cash-strapped carriers significantly reduced or delayed FTTH targets and network improvements. As such, optical cable demand fell sharply at the turn of Q3 and has little improved since then. CRU now expect total annual cable demand in the region of just 21 million fibre-km in India this year.

Elsewhere, slower deployments at carriers in both the US and Europe during Q3 and Q4 to-date has led to marginal downgrades here. We do expect healthy growth in both markets, however more in the region of 4-6% y/y in 2019, as opposed to our earlier estimations of near double-digit growth back in August. These downward adjustments have subsequently weighed heavily on global growth, which we now forecast to contract by 6.8% this year.

Beyond this, CRU have also tempered our view for Chinese optical cable demand in 2020. Whilst we believe 5G will have a bigger impact on demand next year, still relatively early-stage network construction will not be enough to offset the ongoing slowdown from FTTH and 4G. Consequently, we expect a further contraction in the Chinese market in 2020.

Overcapacity in China and elevated inventory levels remain the biggest risk to market health next year. Unless significant and ongoing cuts can be made in China, to help rebalance the domestic market, CRU expect no reprieve to global bare fibre prices in the near-term.

We cover the above and more detailed research in our Metallic Wire and Cable Market Outlook and Telecom Cables Market Outlook. Here we include demand, supply, trade and price forecasts for the next five years broken down by major regions and countries.