* Copper users battling weak demand, high and volatile
* Investor interest leaves copper prices high despite poor
* More copper substitution expected; EU demand flat from
By Maytaal Angel
LONDON, March 20 Copper products maker KME Group
said its European customers are scrambling for cash and
seeking even longer payment terms than last year at the peak of
the lending squeeze seen during the sovereign debt crisis.
Riccardo Garre, chief executive of KME, said that while EU
bank lending to small- and medium-sized enterprises was no worse
this year than last, customers were struggling to make payments
as they battle weak demand combined with high and volatile
"Payments terms are done at 30 days, 60 days or even 90 days
in some countries. It's difficult to quantify but there's a
deterioration, and on top of that there's an increase in bad
debts because companies are going bankrupt," Garre said.
Italy-based KME consumes about 5 percent of the
estimated 4 million tonnes of copper used annually in Europe.
Its clients include those in the hard hit construction sector,
as well makers of parts for cars and white goods.
In 2011 and early 2012, bank lending was constricted by a
regional debt crisis and tougher global capital rules that at
the time put some 3 trillion euros ($4 trillion) worth of
corporate loans at risk of being cut.
While EU bank lending to small and medium sized enterprises
has ceased to shrink, they continue to have difficulty raising
This week, a eurozone decision to partially fund a bailout
of Cyprus by taxing savers took the crisis to unprecedented
territory, raising fears that a scramble to withdraw cash from
banks could spread to larger states.
"So far banks gave more or less the same amount of money as
last year, but in a few months annual reports for several copper
players will show they're in a difficult situation, and the risk
is banks will close more loans."
Garre said copper demand in Europe remained depressed but
steady this year. KME's sales, for example, declined 12 percent
last year but have been flat at low levels this quarter when
compared with a year ago.
According to the International Copper Study Group, demand
for copper in Europe declined 7.5 percent from January to
November last year. By contrast, copper prices over the
period rose by about 5 percent.
"When there is a crisis like the ongoing crisis in Europe
and you have to manage high prices of goods and volatility, it's
mission impossible," Garre said.
"More and more, copper has moved from an industrial metal to
a financial commodity, our customers have to buy copper
(products) at high prices despite deteriorating demand. This is
accelerating substitution," Garre said.
Garre said over the past five years, nearly half a million
tonnes of copper have been substituted in Europe by cheaper
metals or plastics - equivalent to about 2.5 percent of annual
KME expects to consume about 100,000 tonnes of copper this
year, unchanged from last year, and believes restocking by its
customers and improving industrial output globally will prevent
its copper use falling below last year's levels.
(Reporting by Maytaal Angel; Editing by Anthony Barker)