Nexans, one of Europe's largest copper cable manufacturers, is planning to shut down its Hannover Land High Voltage (LHV) plant in Germany in response to weak European demand.
"We currently have two plants for LHV in Belgium and Germany. The European market today, given its size, cannot afford two plants, so Nexans plans to close the Hannover plant," the firm said.
There is no set timeframe for the shutdown as Nexans is in talks with the unions on the restructuring and the consultation process is expected to last several months.
Paris-based Nexans is the second largest cable producer in Europe. It manufactures cables for submarines, land-based high voltage operations, telecoms and data and is one of the biggest copper consumers in the region.
Nexans' plan to shut down copper cable production in Germany has caused concern in the industry, with multiple sources suggesting the group is cutting overall production in Europe.
But Nexans said it will not cut copper cable production and will be able to maintain its current output by increasing production at LHV Charleroi Belgium to compensate for the Hannover closure as both plants are currently operating at reduced capacity. Nexans declined to specify the capacity of these two plants, the utilisation rates at which they are currently running or the duration for which they have cut utilisation.
Nexans' High Voltage business segment in Europe in 2018 saw a 21.3pc year-on-year fall in organic growth to €683mn ($778mn) at constant non-ferrous metal prices.
The weakness of organic growth in LHV demand through a lack of new projects in Europe caused capacity utilisation rates at the Nexans European plants to be very low throughout 2018, the group said in its full-year results.
Nexans also faced postponement of some submarine high voltage projects, which further compounded lower than expected LHV sales in 2018.
"Nexans has not been in the best shape in the past 10 months — the share prices have dropped and the CEO had to step down," one copper supplier said.
Former Nexans' chief executive Arnaud Poupart-Lafarge was replaced by Christopher Guerin on 4 July 2018.
The firm's diluted earnings per share in 2018 plunged to €0.32, down eight-fold compared with €2.71 in 2017, according to Nexans' financial statement in February.
But the firm said it will not be cutting its grade A copper cathode consumption this year, despite the planned plant closure in Hannover.
Copper cathode suppliers to Nexans said they were not notified of any changes in the firm's annual contractual volume.
Nexans consumed a total of 495,000t of copper — refined and scrap — and 105,000t of aluminium in 2018. And the firm plans to use more copper scrap as feedstock this year, which it sources internally from its own manufacturing process and from cable recycler RecyCables.
Nexan used approximately 27,400t of copper scrap last year — an increase of 24.5pc from 22,000t in 2017 — in continuous casting operations in Montreal, Canada and Lens, France.
Nexans owns a 36pc interest in RecyCables, which processed 17,300t of cable waste in 2018, up from 14,720t in 2017.
Nexans could reduce the supply that RecyCables can resell in the European market if it increases the volume of copper scrap used in production.
