Prysmian mulls resuming Mexican fiber production after tariffs show results

Italian energy and telecom cable company Prysmian is studying resuming operations at a Mexican plant after the government imposed tariffs on imported fiber, Cleber de Conto Pettinelli, telecoms director at Prysmian Brasil, told BNamericas.

Prysmian operates a factory in Mexico's Durango state. The plant, opened in 2017, produces fiber and optical cables. But Pettinelli said the plant has been dormant after a drop in demand caused by what Prysmian considers dumping of Chinese fiber.

However, a 35% tariff on fiber optics cables has been in force since April 23. Although the measure applies to all origin countries, China is the main exporter of fiber to Mexico. The EU and the US have similar barriers in place.

According to Pettinelli, a decision to return the factory to full capacity has not been made, however.

In Brazil, Prysmian has put on hold plans to close its Sorocaba factory, the only one in the fiber industry in Latin America that produces all components of the product. The decision came after the Brazilian government opened investigations into the dumping of Chinese cables and fiber optics.

As part of the dumping investigation, the industry, development and commerce ministry will begin technical due diligence on September 23, focused on Prysmian’s operations and those of competitors and importers of Chinese fiber.

Last week, the Brazilian government opened a second dumping investigation, specifically related to Chinese fiber. There is still no deadline for the start of the due diligence for this probe.

Yet, the signaling from the government and the opening of both investigations were crucial for Prysmian Brasil to convince the Italian parent company not to shutter the local plant.

Prysmian and competitors such as Furukawa want Brazil to impose a 35% tariff on imported fiber, like in Mexico.

Prysmian estimates that more than 50% of the fiber supplied to the Brazilian market is imported.

BRIGHTER SKIES

Despite a slowing telecoms business, Prysmian's energy cable line, in Latin America and in other parts of the world, remains strong and has seen demand arising for fiber for datacenters, according to Pettinelli.

In Brazil, the company is also upbeat about a bill that was approved about a month ago that extended programs to encourage the domestic manufacture of electronics and ICT equipment.

The bill increases credit for local technologies. At present, industries receive a financial credit of 13.65% of the value of eligible technologies developed in the country, but with the changes, the credit will increase to 15% in the center-south and to 17% in other regions.

And even amid the tough competitive scenario, Prysmian anticipates a positive volume for next year in telecoms, with new orders being made mainly by large Brazilian operators, and a more favorable macroeconomic scenario.

Another bet that is paying off, according to Pettinelli, is partnerships with highway concessionaires for the installation of cables along routes that are being granted and concessions that are being renewed.

Prysmian's Latin American revenues grew in the first six months of the year. Sales were 708mn euros (US$773mn), up from 696mn euros in the same period of 2023.

Meanwhile, global sales declined 3% to 7.82bn euros. 

According to the company’s results report, the “strong organic growth generated by the transmission business (+9.5%), and power grid (+1.7%) was offset by a contraction in sales in both the electrification and digital solutions [telecom] businesses.”

Net profit stood at 410mn euros, compared to 413mn euros in the first half of last year.