AMESBURY, MA – It’s no secret the demand for hybrid and electric vehicles is leaving copper suppliers scrambling to cover orders. As is typical with commodity demand swings, fabricators seem to take the brunt of the hit. One leading supplier says it has its bases covered.
Ventec USA CEO Jack Pattie sat down with PCD&F editor-in-chief Mike Buetow in June. Excerpts:
PCDF: Ventec COO Mark Goodwin wrote in May that the copper shortage is expected to last 12 months. What is the basis of this shortage?
JP: We started to hear from Asia that a tsunami of copper and glass shortages was coming. Colleagues in Asia, the UK, etc., reported rigid prices were spiking, but it wasn’t happening in the US.
As background, Ventec owns its own distribution channel. Global Laminates merged with Ventec in 2011 and that streamlined the distribution channel. Our business model in the US is different than the Asian competitors because they all go through distribution.
Ventec has long time partnerships for all of our raw materials and therefore made arrangements to get copper foil we needed. We really want the Western world to know we have no issues with copper foil and we are committed to the Western market. There have been price increases, but no shortages on our supply chain to the Western markets. There's a three-month lag in the US and Western market in pricing as that is how long it takes from material order to arrival at our service centers. In China everything is built to order, so there's no price lag. We knew six months ago that rigid laminate was going to go up 60 to 70% in China. As we have a different business model of wholly owned subsidiaries for the distribution of our products, [we feel] Ventec has a stronger commitment to the Western markets than some of our Asian competition. As we are a manufacturer, we also have real-time data on the supply chain issues, especially price and lead time. We have tried very hard to convey this information to our customer base so they understand the market conditions. This is our responsibility and commitment to our customers.
Based on market info from the Chinese government and their estimated copper usage, especially the battery market, there's a minor market correction right now. So we are seeing pricing drop a little bit, but our market information tells us that we should expect the copper supply to tighten again.
PCDF: Is this due to capacity shortages or are supplies being diverted to other uses?
JP: As far as I know, it's a diversion of supply. The major cause is electric vehicle batteries. Air quality is awful in china and a major cause of the pollution is automobiles which are growing every day. You can see the need to go electric. There was a 7628 glass shortage. It could have been because ovens were taken offline; I’m not really sure. There is also a diversion from thicker-glass fabrics to thinner-glass fabrics as that is obviously more profitable for the glass manufacturers.
Our polyimide product line is really exploding. Ventec has the second-highest capacity for insulated metal substrates in the world. There is no IPC specification for IMS yet, so it is being copied a lot. IMS is used for lighting. A lot of counterfeiters use poor materials that “pop” in industrial lighting.
PCDF: To what extend do suppliers base capacity decisions on copper prices?
JP: It is not only copper pricing but also availability. Normally you can depend on a reasonable availability and stable copper pricing. But in the past six to nine months, laminate factories in China are dealing with almost daily pricing changes due to lack of availability.
PCDF: What is Ventec specifically doing to address the constraints?
JP: Ventec has a strong supply chain for our raw materials which is based on long-time relationships with our suppliers. As quality is of ultimate importance to Ventec, we don’t change suppliers to save a few pennies. This has allowed us to remain stable production capacity when many of our competitors had to decrease production due to lack of supply of copper and glass.
PCDF: How is Ventec’s approach different, if at all, from its competitors?
JP: We are the only Asian laminator to have wholly owned subsidiaries in the US, UK and Europe. This alone makes us hugely different as we can streamline our supply chain. We're not necessarily high-volume in China as compared to our competition. We really love to support the small-volume, high-mix fabricators in the Western markets.
PCDF: Have you been able to pinpoint companies that you picked up because of competitor constraints?
JP: Yes, absolutely. If it wasn't a target long-term customer, we didn't really entertain it as we want long-term partnerships with our customers. Many of our competitors in China have been extending lead times to the US and Europe. I believe this is mainly due to their commitment to the Asia market first. Again, as Ventec International Group is one company with wholly owned subsidiaries in the Western markets, we have a stronger commitment to the Western markets.