China's Copper Demand to Increase by Just 9% This Year
By Interfax-China
18 Apr 2008 at 10:03 AM GMT-04:00
resourceinvestor.com
SHANGHAI (Interfax-China) -- China's refined copper demand is set to rise by at least 9% to 4.9 million tonnes this year, showing a clear slowdown from last year's 18.4% growth rate, a senior official with China Nonferrous Metals Industry Association (CNMIA) told Interfax today.
An expected slowdown in China's GDP growth, due to macro control policies, will impact China's copper demand growth. However, it will still remain strong on the back of booming demand from downstream sectors, such as power generation, electronics and telecommunication, said Shang Fushan, vice chairman of CNMIA, at the 2008 China Copper Industry Chain Forum held in Beijing today.
Shang predicted China's refined copper production would rise at least 10% from last year to 3.8 million tonnes this year.
"China's copper smelting sector is still facing the risk of overheating due to expansion, although the government is adopting control policies to curb overcapacity in the sector. New refined copper capacities are due to come online between 2008 and 2009, putting further strain on copper concentrate resources in China," Shang said.
The control policies include the closure of older and small smelters, and also encourage technical upgrades for these facilities. This has meant many facilities have remained open thanks to facility upgrades and are actually increasing copper capacity.
Major copper projects that started operation in the second half of last year, including Jiangxi Copper’s 300,000 tonne smelting project and Shandong Yanggu Xiangguang's 200,000 tonne copper smelting project, are expected to reach full capacity this year, which will be better placed to satisfying market demand.
Increased supply this year will impose significant downward pressure on Chinese copper prices, Shang claimed.
Ample supply in the domestic copper market coupled with record low inventory in the international market has caused the price gap between the two markets to expand. Currently, the London cash copper price stands at as much as RMB 8,000 ($1,142.76) per tonne higher than the Shanghai cash price.
"Current copper prices, either on the LME [London Metal Exchange] or SHFE [Shanghai Futures Exchange], do not really reflect copper supply and demand fundamentals, and are more influenced by speculative funds. It is expected that copper prices in China will stay at high levels this year, but the average price will remain lower than last year," he added.
China's refined copper consumption stood at 4.5 million tonnes in 2007, expanding 18.4% from the previous year, while refined copper output hit 3.5 million tonnes, up 16.61% from 2006, according to statistics released by CNMIA.
Shanghai Futures Exchange (SHFE) copper futures traded at low levels today, pressured by weak copper consumption. The most traded July delivery slipped RMB 660 ($94.29), or 1.02%. at RMB 64,200 ($9,171.43) per tonne.
SHFE copper stock decreased 2,708 tonnes today to 56,182 tonnes this week.
Commentary
The slowdown of China's copper demand growth, as well as for other metals commodities, is very much predictable, given expectations of slowing GDP growth this year. However, China's expanding copper smelting capacity and the unsuccessful elimination of outdated capacity pose a problem that the government must still address.
What's more, the copper price gap between the international market and the domestic market continue to enlarge, which will result in rising refined copper exports, the Chinese government is expected to raise export taxes further.
© Interfax-China 2008. For further information regarding Interfax China Commodities Daily Reports, contact David Harman at david.harman@interfax-news.com. Interfax also publishes a comprehensive China Grains & Soft Special Report in March 2008, contact David Harman for details. |
