Copper... analysis of demand from China:
sprott.com
A pertinent quote for copper (NXG and NTO) investors:
Railroads and pipelines are merely the tip of the iceberg. China is currently building power
plants at the rate of two every week. To put this in perspective, this is five times the rate at
which power plants are being constructed in the US. (Remember that the US economy, on a
non-PPP basis, is supposedly five times the size of China’s!) China is already the world’s
largest consumer of copper. As an aside, to put this in perspective, in 1990 the US consumed
four times as much copper as China, and as recently as 2001 the US was still a bigger
consumer of copper than China. Today China consumes twice as much copper as the US.
This goes to show how quickly things can change when 10%+ growth rates enter into the
equation!
50% of China’s copper consumption currently goes toward power generation and transmission.
It is little wonder, therefore, that China’s copper consumption continues to grow north of 10%
every year. Needless to say, this fact bodes well for copper demand and copper prices going
forward. Much has been made of the negative implications for copper demand of the slowdown
in US homebuilding. It would appear that the concerns were overblown because people
underestimated China’s appetite for the metal, which more than makes up for any shortfall in
copper demand due to weakness in the US housing market. Recently, the president of
Codelco, the world’s largest copper company, said that China “is building cities at an
unimaginable rate… urbanization in general demands a lot of copper.” As far as copper is
concerned, China is clearly king. In fact, just the growth in Chinese copper demand is greater
than all the copper that will be used in US housing this year. As another sign of the
voracity of China’s power needs, for the first time in history they are now a net importer of coal,
even though they enjoy one of the largest endowments of coal reserves in the world. In other
news, China recently announced its decision to build a strategic uranium stockpile to fuel future
nuclear reactor needs. Albeit, it is experiencing difficulty finding the necessary uranium. |
