A Study On Cost-Benefit And Sensitivity Analysis Of Aluminum And Copper Wire Manufacturing Industries

Abstract

The production of wire and cable plays an important role in the electrical, infrastructure, renewable-energy, 
automotive, telecommunications and industrial markets. Copper and aluminium are the two main raw materials for 
electrical cables and wires, but differences in their physical characteristics, market price, processing processes, 
energy consumption, costs of manufacturing and operations allow for an examination of the differences in the 
application of the two materials in manufacturing. This research project has investigated the cost-effectiveness and 
sensitivity of aluminium and copper wire production with a focus on production costs of raw materials as well as 
processing costs, labor, energy, maintenance costs, investments in equipment and facilities, product volume and price, 
profitability, breakeven level, NPV, BCR, and IRR. The research methodology applied in this report includes 
comparative quantitative analysis based on secondary information and analytical framework based on the 
representative model of a medium-sized manufacturing company. A five-year investment horizon was chosen, and the 
economic performance of the comparable production options was analyzed under consistent assumptions about 
capacity and capacity level, depreciation, working capital, corporation tax rate, discount rate and market conditions. 
The results of the research imply that manufacturing companies should apply dynamic cost-benefit models and 
sensitivity studies as opposed to relying on the input price of materials only. Such an approach would make it possible 
to improve investment targeting, product mix decisions, procurement policies, capacity use in the wire production 
industry.