Cablena: 'The fiber market is seeing a collapse this year'

Mexican optical cable manufacturer Cablena is a major industry player in Latin America. 

Part of Condumex, belonging to the conglomerate that makes up Carlos Slim’s Grupo Carso, Cablena makes optical cables for the auto and telecom industries. 

It has plants in Spain, Mexico, serving mainly Telmex and Telcel, companies in Slim's América Móvil group, as well as Central America and part of South America, and in Brazil. Cablena do Brasil also serves Argentina, Paraguay and Uruguay, among others.

Recently, the Brazilian subsidiary, alongside competitors Prysmian and Furukawa, petitioned for a dumping investigation against Chinese manufacturers, as reported first by BNamericas. The government saw evidence of the practice, including alleged illegal Chinese government subsidies, and opened the probe.

The US has restrictions on Chinese fiber, while the EU has anti-dumping measures in place and India is considering doing the same.

In this interview, Carlos Oliveira, sales manager of Cablena in Brazil, talks about the anti-dumping process, market demand and the perspectives for the company in a challenging scenario.

BNamericas: How is the market for Cablena?

Oliveira: We had some meager expectations for 2023, which didn't materialize. The Brazilian [fiber and optical cable] market has grown, but more due to imports, mainly from China. 

With some of our export contracts ending in 2022, we ended up more exposed to the local market, which is going through this situation.

We already had a more or less drawn scenario that 2022, early 2023 would be hard, due to 5G, which did not come out in the timing expected by the market.

Betting on the new technology, cable companies prepared in terms of supply, but electronics did not keep up.

What's more, there was China Telecom's situation in 2019-20. What they planned to invest in fiber, they ended up not investing. As a result, fiber prices fell.

BNamericas: So the fiber offer in China, not being absorbed by China Telecom, was channeled by suppliers to other regions, such as Latin America, driving down prices?

Oliveira: Exactly. And then you already had anti-dumping measures in place against Chinese cables in Europe, since 2021. In the US, you also have restrictions. Now India is filing dumping against China. All this extra volume comes to Brazil, to Latin America.

BNamericas: Has Chinese growth in the fiber market been concentrated in Brazil?

Oliveira: No. We see this reality in other countries. [América Móvil] started to open its tenders for optical cables to the world, and with that these distortions started to appear. The group is already buying from the Chinese market.

Today we find Chinese fiber in all countries, serving different companies.

In Brazil, the group started purchasing from some Chinese makers [Fiberhome], but faced with quality problems, they started buying back from us, from Prysmian, from Furukawa.

BNamericas: Doesn’t América Móvil have an exclusivity agreement with Cablena?

Oliveira: No. A lot of people said that the group subsidized Cablena, etc. That never happened. They have always opened up to other suppliers. But while other operators were buying from China, Claro was not.

Regarding buying, it sees a price difference that can get to 30%. That's a lot of money when it comes to cables. It's appealing. 

Eventually, they backtracked. But this has already spread to Latin America. With perhaps the exception of Argentina, where it is more expensive to import fiber from China.

BNamericas: Where is your production concentrated in Brazil?

Oliveira: We have two factories. One in Vinhedo and the other in Itupeva, [both in São Paulo state]. Our first factory, in 1998, was focused on automotive cables.

We sell auto cables to all carmakers in Brazil, except the French ones. It is a business that ends up offsetting the impact of telecom.

In 2005, the América Móvil group started to invest in the Brazilian market and with that, we set up a unit for optical cables. For 15 years, we supplied the group with practically everything we produced. Eventually, we expanded this capacity and added other clients.

Three companies are considered to have high quality and standards by the market. We, Prysmian and Furukawa. But when you take a price sensitive market...

BNamericas: Does Cablena manufacture end-to-end the fiber cabling?

Oliveira: No, we import the fiber and assemble the cables here, adding other components to the cabling. As a result, we have tax benefits from [basic productive process program] PPB. 

After some consideration over the past few years, we understood that it would be more reasonable buying from outside and assembling locally.

BNamericas: Who are your international suppliers?

Oliveira: Different sources. We had a contract until last year with Corning, but also with Prysmian, among others.

BNamericas: What is your annual production capacity? And what is the approximate market share?

Oliveira: Our output is around 1Mkm of cables per year in Brazil. We had more than 20% of the market [behind Prysmian and Furukawa]. Today, with this market opening and these distortions, we have less.

BNamericas: Which countries in South America are you selling to?

Oliveira: Argentina, Bolivia, Paraguay, Uruguay and Ecuador. The rest is handled by Cablena from Mexico.

BNamericas: Some countries are auctioning 5G this year. Uruguay has just held an auction, with América Móvil as one winner. Are the prospects good?

Oliveira: They're good. But only for 2024. These purchases do not occur this year. In terms of purchases, 2023 is already contracted and what had to happen has already happened.

Our challenge now is to remain balanced, balance our sales, and see what will happen with this dumping investigation. In a way, [the probe] is our silver bullet.

BNamericas: But the investigation is long term and the outcome may not be favorable for Cablena, Prysmian and Furukawa.

Oliveira: No, it's not short term. It'll take about a year, although some measures might be imposed by the government in six months. Anyway, it would only be for 2024.

BNamericas: So, 2023 is a standby year for Cablena?

Oliveira: That's it. The year 2023 had already started in a downturn. 

In the US, consumption of optical cables fell 14% in the first quarter. China, which is about 50% of the global optical market, was down 7%. That already represents some 'Brazils', just this first quarter alone. It's a lot of fiber, fiber that starts to come here. It would be like two years of our production, just this quarterly fall.

The word people in the fiber sector are using for this year is collapse. The fiber market is seeing a collapse this year.

The global market is at pre-2018 levels. And the fiber price is going down, due to weak demand. Fiber cost US$9, US$10 [per km]. It got to US$3.80, rose to US$5 and is now being marketed at about US$4. It's a 25-30% drop.

We see some of our competitors temporarily stopping factories, reducing shifts.

On the other hand, this anti-dumping process, which we saw as very difficult, we managed to get the Brazilian government to open. It is a victory, and that has to be celebrated. Our focus is now 2024.

BNamericas: Until then, are you going to reduce costs? Close factories?

Oliveira: We have already reduced. We made two major reductions at the factory and we are going to maintain the capacity we have. Closing factories, for now, is out of the question. And it wouldn't even make sense now with this dumping probe. We are betting on 2024.

BNamericas: Would you say that Cablena may have made any strategic mistake over the years?

Oliveira: I don't think so. But perhaps the market as a whole, including our competitors, did not prepare in advance for the fiber boom that would come in 2017.

To prepare, to invest in advance. And with that being able to meet the delivery deadlines the market [carriers, auto industry] needed. In the face of a delivery period of six months, the buyer looks outside, elsewhere. 

When buyers look elsewhere, they see costs, compare the costs. Importers spot an opportunity there and start to take root.