Dow Jones story: Copper Buyer APWC Seeks Cash In HK Amid China Lending Squeeze
SINGAPORE (Dow Jones)--Nasdaq-listed Asia Pacific Wire & Cable Corp. (APWC) is looking to Hong Kong for financing of its three Chinese operations due to tight credit conditions and limited lending in China, the company's Chief Financial Officer Frank Tseng said Tuesday.
Monetary tightening, which Beijing has imposed in a bid to curb inflation and limit speculative activity, could in theory slow consumption of key materials such as copper, of which APWC is a large consumer, but Tseng said alternative credit arrangements are helping to maintain liquidity, while demand for copper products is also strong.
"We have encountered some tightening from local banks and we are finding other sources to get more credit lines," he said. "We're seeking out financing opportunities overseas rather than [in] China, for example [from] Hong Kong-based banks that are interested in funding China mainland projects."
Tight credit conditions are affecting large and small companies alike, Tseng said. It is "not particular to multinational companies like us; as the Chinese government tightens bank lending via interest-rate [increases] to control inflation, we see other smaller private-owned peers suffering from the choke of less credit."
APWC is headquartered in Taipei, Taiwan, and has operations in Thailand, Singapore, China and Australia that make products including power and telecommunications cables.
The credit clampdown in China has raised concerns over fabricators' ability to secure enough cash to buy large volumes of copper and end users' ability to buy copper products, but Tseng said demand remains robust from the world's second-largest economy.
"China is using 6 million [metric] tons a year of copper and it seems to be continually rising," he said.
Historically high copper prices on the London Metal Exchange are evidence of the strong Asian demand, he said, forecasting medium-term prices between $9,000 and $10,000 a metric ton as consumption rates continue rising.
Copper's move to record highs of $10,190/ton in February this year didn't cause cash-flow problems for APWC, Tseng said, despite market expectations that cable manufacturers would be reluctant to buy copper at prices above $8,000/ton and could look to use more aluminum in their products because of the threat to profit margins.
Three-month copper opened at $9,604.50/ton on the LME Monday, 42% higher than this time a year ago.
"We are able to pass the cost on to our customer...We normally buy on last month's average based on the LME price or on the first five days of the current month's [average]," he said. APWC buys around 50,000 tons a year of copper from Taiwan, Korea and China.
In response to continuing strong demand for electronic wire from China, AWPC is modernizing its Ningbo Pacific Cable Co. subsidiary, Tseng said, adding that he is anticipating rising domestic demand for the plant's products, which are used in flat panel displays and electronic cars.