KME Expects to Raise Copper Production as Much as 19% This Year

April 15 (Bloomberg) -- KME Group, whose copper goes into products from Volkswagen AG's Audi sports cars to Electrolux AB washing machines, expects to raise production as much as 19 percent this year after a record slump in 2009.

Output will climb to between 510,000 and 520,000 metric tons of copper and copper-alloy products, Chief Financial Officer Italo Romano said today by phone. Production at Florence, Italy-based KME fell 23 percent to 437,000 tons last year because of the world recession.

"The industrial sector is really recovering in comparison to last year," Romano said. Demand is improving from areas including cars, electronics, heavy industry and appliances, particularly in northern Europe, he said.

Copper demand will climb 4.5 percent this year, according to Barclays Capital, after a 2 percent drop in 2009 caused by the worst global economic crisis since World War II. Industrial production in Germany, the biggest European economy, rose 5.8 percent from a year earlier in February after adjusting for the number of workdays, figures showed on April 8.

Copper for three-month delivery has gained 7.4 percent in 2010 on the London Metal Exchange after more than doubling last year on a weaker dollar and record imports into China in the first half. The metal traded at $7,924 a ton at 2:55 p.m. local time.

Since 1886

KME, which has roots going back to 1886, is Europe's largest brass mill and makes products including tubes, flat rolled products, rods, bars and sections. Brass is an alloy of copper and zinc. Brass-mill products exclude wire rod, according to London-based researcher CRU.

The company sold 571,000 tons of copper and copper alloys in 2008, before the global financial crisis curbed demand. KME had to cut 150 contractors and 254 of its staff, reducing the workforce to 6,485 by the end of last year, Romano said.

"We don't see a quick recovery to the production levels of 2007 and 2008," he said. "We continue to use short-work in all the different plants."

Demand has been slower to revive in southern Europe, with the construction industry particularly affected by a severe winter in the Northern Hemisphere, according to the CFO.

Construction accounts for 35 percent of worldwide copper demand, electronic products absorb 32 percent and 12 percent goes into industrial machinery, according to Barclays Capital.

KME stock was last down 1 percent on the day at 30 euro cents in Milan trading. It has dropped 2.8 percent this year, cutting the company's market value to 139.7 million euros ($189 million). Shares of predecessor company Societa Metallurgica Italiana were first listed in the city in 1897, KME's Web site shows.