Metal Products News
- Copper demand unscathed by stock fall
Date: 5-Mar-2007 Sources: (Shenzhen Daily)
CHINA has been on a copper building spree - monuments included, from a massive copper pagoda to a 320-foot Buddhist statue.
These attractions, as well as millions of more mundane items such as copper wiring for apartment buildings, copper air conditioning parts and copper auto-motor components, have turned China into the world's largest consumer of what locals call the 'red gold.'
Last year the country used four million metric tons of copper, or about 22 percent of the world's supply. That's up from 10 percent a decade ago, according to industry estimates.
And with forecasts for Chinese consumption of copper, aluminum and other building-block materials calling for similar growth rates or more, mining and metal companies are putting capital into new production.
But will China's demand for copper and other base metals last?
Fears that it won't spooked metals futures and mining shares last week.
A nearly 9 percent drop in the Shanghai stock market Tuesday, triggered in part by government efforts to rein in speculative buying, spelled economic slowdown for investors around the world. In New York, London and Toronto, they sold off shares of companies with products tied to China.
'China we believe will be a positive source of demand for years to come,'said Freeport CEO Richard Adkerson at a mining conference last week.
Problem is, not everyone shares that view. Whether their products end up in beer cans or construction beams, miners and metals makers were hit hard by fears that China's manufacturing boom could falter, curbing appetite for metals and ore in what has been their fastestgrowing market.
Alcoa Inc. (AA) , the world's largest aluminum company and a member of the Dow Jones Industrial Average, saw its stock fall about 7 percent last week, outpacing a 4 percent drop for the index. U.S. Steel Holding Corp. (X) lost 7.6 percent.
Shares in diversifi ed global miners BHP Billiton Ltd. (BHP), the Australian mining conglomerate; Rio Tinto Plc (RTP) and Switzerland's Xstrata Plc suffered a similar fate, posting losses of about 10 percent for the week.
This reaction contrasts with the generally rosy outlook repeated over the last few months by the industry and its observers. China's industrial economy has shown no signs of slowing down, whether in terms of car output or housing construction, they say.
'We're predicting an 8.5 percent increase in Chinese refi ned copper demand this year, to about 4.3 million metric tons,'said Jon Barnes, principal consultant for copper fabrication at CRU Analysis, a London-based metals consultancy.
A similar pace should continue over the next few years, he said.
'Barring something like a trade war or a confl ict with Taiwan or a SARS outbreak, we see very little reason why there should be any interruption to Chinese copper consumption,'he said by phone Thursday.
Meanwhile, Jose Pablo Arellano, executive president of world-leading copper producer Codelco in Chile, said Thursday the company still sees 'firm demand?from China this year.
Arellano, quoted by Bloomberg News, was speaking at a news conference called to discuss the company's staggering 88 percent increase in 2006 profi ts.
Miners around the world are backing Codelco's projections with plans to ramp up their own output.
'We see no slowdown in Chinese demand,'said Robert Friedland, Ivanhoe's founder and executive chairman in an interview.
What happens with the Chinese stock market doesn't necessarily refl ect the Chinese economy, said Friedland, who has a home and offi ce in Beijing.
'The process of urbanization is not going to change in response to the vagaries of an overheated stock market. If anything, the correction in the stock market is healthy,'he said.
One proof of future copper demand from China, says CRU Analysis' Barnes, is that government authorities have announced plans to build several new copper factories over the next two to three years. These fabrication mills will take refi ned copper concentrate and turn it into such semi-fi nished products as wire rod.
If all of these projects happen, China will add factories that could consume an additional 3 million tons of copper every year - up about 75 percent from its current demand levels.
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