Increased fiber-making will make prices less volatile

Increased fiber-making will make prices less volatile

Prior to 1997, fiber-optic cable prices remained stable in the worldwide marketplace, mainly due to a two-year shortage. In early 1997, however, the shortage was eliminated as many of the world?s leading fiber manufacturers brought additional fiber-making capacity on line. Fiber prices, as a result, have been rather unstable during the last few years. But that volatility, according to the latest report from KMI Corp., a Newport, RI-based market-research company specializing in fiber-optic technology, is about to level off.

The report, Worldwide Markets for Optical Fiber and Fiber-Optic Cable, cites additional capacity as one factor contributing to the steep price drops during the last two years, when fiber prices dropped more than 20% from January 1997 to June 1998. Although prices are expected to drop another 8% to 10% per year in 1999 and 2000, the once-volatile market appears to be leveling at the lower-cost end of the spectrum.

Reduced demand in Southeast Asia due to the financial crises and more limited resources for network construction are other factors contributing to lower, more stable pricing. These drivers have also affected other markets, causing some suppliers to bid with low prices in Europe and other countries to recoup sales lost in Asia. Meanwhile, the demand for fiber and cable in other key markets was soft, in some cases due to uncertainties attributed to regulatory or corporate/organizational changes.

A few key findings of KMI?s study include the 24% worldwide price drop of bare singlemode fiber since 1996 and an 8% decline in multimode fiber prices during the same time period. The forecast for singlemode bare fiber through 2002 is an average 8% decline, leaving prices in 2002 at $0.028 per fiber meter.

Other forecasts made in the study show an ample amount of fiber manufacturing capacity in the near term to avoid another fiber shortage, although capacity is expected to tighten again in 2002. There will also be a brief capacity bottleneck in the submarine cable industry, possibly into 1999, due to increased announcements of international submarine systems.

A flattening market for combined singlemode, multimode, and submarine cable can be expected from 2000 to 2001 due to the price decreases in singlemode bare fiber being passed to end users and a decline in demand for international submarine cable in 2000.

The full report, covering 235 singlemode and multimode fiber cablers, 57 fiber manufacturers, and 51 countries, is available by contacting KMI at (800) 343-4035, (401) 849-6771, fax: (401) 847-5866, or e-mail: info@kmicorp.com. u

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