Copper hits record high, UltraTech’s Ultravolt on the offensive: A double whammy for cable makers in FY27?

Copper's value has skyrocketed, reaching an unprecedented $14,533 per metric ton. This surge is primarily due to tariff-related trade flows, which has led to increased expectations of tight mine supply. Recent reports from the International Copper Study Group indicate that global mine output declined by 1.1% in the first half of the year, with major producers like Codelco and Freeport-McMoRan reporting significant drops. This is causing cable makers to face pressure from multiple fronts.

Polycab India, along with other key players like RR Kabel and KEI Industries, are feeling the pinch from both sides. On one hand, they are dealing with the surge in copper prices, which has forced them to hike their prices by 18% to 19% from January to March. On the other hand, the entry of UltraTech's Ultravolt into the sector as a potential second biggest player is adding to their woes. UltraTech aims to command a significant share of the market, which could further strain the existing wire and cable companies.

Analysts are expressing caution, questioning whether the growth in the cables and wires industry has peaked. They are also concerned about the competitive landscape, with UltraTech and Diamond Power expected to collectively hold over 12% market share by FY29. Valuations for C&W stocks are also high, trading at a premium to their 5-year and long-term averages.

The recent price hikes by companies like Polycab India and RR Kabel reflect the growing concern over rising copper costs and the ability to pass on these costs without affecting demand.