China's Copper Demand May Rise 14% Next Year, Minmetals Says
Oct. 28 (Bloomberg) -- Copper demand in China, the world's largest consumer of the metal, may grow as much as 14 percent next year as the country uses more of the metal in power generators it plans to build to ease electricity shortages, said China's largest metal trader.
Copper consumption may rise to 4 million metric tons in 2005 from 3.5 million tons this year, Zhou Feng, senior economist and manager of the Nonferrous Metals Division at China Minmetals Co., said in an interview in Beijing. China Minmetals is the country's biggest trader of metals. Over half of China's copper is used in power plants.
Growth in China's economy, which expanded 9.5 percent in the first nine months this year, may slow next year to about 8.5 percent as the government acts to curb inflation, said Zhou and other metal analysts. Government measures may include a rise in interest rates, the first since 1995, Zhou said.
``The forecast for copper includes the possibility the country will raise interest rates in the fourth quarter, or early next year,'' said Zhou. ``GDP is still a bit faster than the government's target,'' he said.
Power producers are building generation plants to end shortages that caused blackouts in nine-tenths of the country this summer. China plans to spend 200 billion yuan ($24 billion) a year to build plants, adding capacity by about 35 million kilowatts a year for two decades, according to the National Development and Reform Commission, China's top planner.
Curbs
China imposed lending curbs in April to cool investment boom that caused power shortages, clogged transport networks and fueled inflation.
Central bank governor Zhou Xiaochuan said this month the efforts are working. An expansion of 7 percent to 8 percent would allow for a healthy economy for the next two decades, according to his deputy Li Ruogu.
``It's most likely the government will adjust its economic growth to 8.5 percent for next year. Still, copper demand will remain high,'' said Wang Zhongkui, a deputy manager at Beijing Antaike Information Co., an affiliate of the China Nonferrous Metals Industry Association.
Interest Rates
Inflation in September rose 5.2 percent from a year earlier, after climbing 5.3 percent in each of the previous two months.
``The current inflation is above the government's 5 percent benchmark, so an interest rate increase is very possible,'' Minmetal's Zhou said.
Higher lending costs may leave traders short of cash to buy copper from overseas. China imports 60 percent of refined copper and 70 percent of copper concentrates it needs each year. It may also dampen demand for the metal used in construction.
``Although an interest rate increase will not have such a negative impact on metal prices, compared with revaluation of yuan, it would be a signal that tougher measures may come,'' said Zhou Ming, a metal analyst with Shanghai-based Guotai Junan Securities Co.
Shortage
Production at Chinese copper makers, including Jiangxi Copper Co., Tongling Nonferrous Metals Co., may rise to 2.2 million tons next year, Minmetal's Zhou estimated.
``Domestic shortage of refined copper may slightly worsen next year, to 1.3 million tons, from this year's 1.2 million tons, as demand growth outpaces production,'' Antaike's Wang said.
China produced 172,700 metric tons of the metal in the first nine months, and imported 967,726 tons of copper.
Imports of copper concentrates, the raw material refined to make copper, may rise to 3 million tons next year, from an estimated 2.7 million by the end of this year, Wang said.
The country imported 2.1 million tons of the material in the first nine months this year, according to figures from the country's Beijing-based customs office.
To contact the reporter on this story:
Xiao Yu in Beijing at yxiao@bloomberg.net
To contact the editor of this story:
Peter Langan at plangan@bloomberg.net
Last Updated: October 27, 2004 21:23 EDT
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