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China copper demand locked in

Citation:Mining Weekly Date:2016-11-11 12:19:44

Copper demand will accelerate thanks to Chinese president Xi Jinping’s first five-year plan, says the International Copper Association.

An analysis of the 13th five-year plan – covering 2016 to 2020 – foresees 15% growth in demand through construction, power infrastructure, renewables and electric cars. 

ICA Asian director Richard Xu said the growth goals for 2020 would reflect well on demand for the red metal. 

“China is expected to see at least 6.5% growth in GDP annually and double the personal income of its citizens by the end of 2020,” he said. 

“To do so, the government will have to invest great resources in areas such as transportation, building infrastructure and energy. All of these sectors provide strong opportunities for the use of copper.”

Copper is up slightly compared to the start of the year, sitting around US$4,700 per tonne. 

Barclays analysis from September puts China’s copper year-to-date import growth at a strong 31.2%, although increased domestic output had slowed the year-on-year import increase. 

In broad terms, Xi has shown himself an interventionist leader who will stick to implementing the goals in his second term (from late 2017), but debt problems could get in his way. 

The International Monetary Fund said in a working paper last week over-reliance on credit, particularly for unsustainable projects, meant growth could not be maintained. 

"International experiences suggest that credit booms of this size increase the risk of slower growth or a disruptive adjustment,” said the ‘Resolving China’s Corporate Debt Problem’ authors. 

While the 13th five-year plan does address some structural issues in industry – the forced drop in steel production is one example – the IMF paper said not enough was done. 

“Selective operational restructuring is not sufficient. It focuses largely on coal and steel producers, does not cover associated losses in the financial system, and does not extend to other sectors in the economy,” it said. 

Away from industry, the ICA found promise in more copper-intensive technologies as the middle class consumes differently. 

China is the world’s biggest buyer of electric cars, and low-speed (think more a golf cart than a Tesla) vehicles number in the hundreds of thousands in each province. Motorists bought over 200,000 regulated new energy vehicles in 2015. 

The ICA explained in its report why the expected growth of 800% in this area is important for copper. 

“A full-electric vehicle uses three to four times as much copper as its gas-powered counterpart,” the report said. 

“As a result of this trend toward alternative fuels, the total number of electric vehicle charging stations and piles are projected to increase by nearly 500% and 1,800%, respectively.”