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Encore Wire opening aluminum wire manufacturing plant

Published 6/13/2014 12:35:28 PM


By Rosalyn Retkwa

A year ago in December, Encore Wire announced that it was about to build its first aluminum wire manufacturing plant as part of its McKinney, Texas complex.   

That 202,000-square-foot facility is now “semi-operational” and will be fully operational by the second quarter of this year, says vice president and CFO Frank J. Bilban. “The building itself was completed in the May-June time frame,” he said.

Since then, Encore has been “buying the latest and greatest equipment we can find,” Bilban added.

Since Encore is debt-free, it was able to fund the $40 million project on an all-cash basis. Bilban said the company didn’t see the point of leaving its cash in the bank earning “almost zero interest,” when it could use that money to expand into aluminum wire as a complement to its existing business in copper wire.

“As a company…we believe copper is a better conductor, period,” Bilban said. But more and more of his customers were asking for aluminum wire because their contractor customers were asking for it. There wasn’t much interest in substituting aluminum for copper before 2004, when copper was selling for less than a dollar a pound. Now with copper holding in the $3 to $4 per pound range for the last six or seven years, “there’s a new dynamic in the spread between copper and aluminum,” he noted.

As of Jan. 30, copper was at $3.73 per pound versus 92 cents a pound for aluminum. Aluminum is in serious oversupply, and a number of market analysts don’t see any reason why its price should rise anytime soon.

But the price differential wasn’t the only consideration—obviously prices can change over time. With aluminum wire, poor supply from a third party was a serious issue, according to Bilban. 

“For a long time, Encore was getting a little bit of aluminum wire from another supplier, who did not make copper wire, to fill in our orders, and their delivery was pretty sad,” he said. “[Delivery of aluminum wire] has long lead times, and I’m not sure why. We thought they were just slow rolling our orders until we investigated and found they were treating our distribution customers in the same slow fashion, which is pretty much accepted in the aluminum wire industry.”

Encore plans on delivering its aluminum wire “coast to coast in one to two weeks,” just like its copper wire, Bilban explained.

There’s another reason why Encore felt it should offer aluminum wire—to get free freight, something Bilban believes everybody wants. The order has to be a minimum of 5,000 pounds to get free freight. Encore believes it will get more orders for its copper wire, if it can increase the total weight of the shipment by adding aluminum wire for those who want it.

Bilban said Encore knows it has lost some copper wire orders because it couldn’t supply some of its customers with aluminum wire as part of the same order. The company thinks it will be able to recoup some of those lost orders while gaining some incremental copper wire business.

“It’s not our intention to push aluminum, but if you want it, we’ll have it,” Bilban said.

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