China's demand for copper, aluminium expected to rise in 2014
China is expected to import more refined copper next year as Beijing steps up building of power networks, rail lines and low-cost homes, while domestic production is likely to be squeezed by tight scrap supply, industry sources said.
Refined copper consumption might rise 5 per cent to 6 per cent next year, three large end-users and producers estimated. This would take consumption to about 8.6 million tonnes, based on 8.1 million tonnes estimated for this year by state-backed research firm Beijing Antaike Information and Development.
Importers are likely to increase orders for term shipments next year to restore stocks, after more than 500,000 tonnes of bonded stocks were used this year, the industry sources and traders said.
This would be a reversal from this year, when importers cut term shipments, depressing copper prices on the London Metal Exchange, which have lost more than 9 per cent so far this year to trade at about US$7,200 a tonne.
China’s economy is expected to continue picking up speed next year, with metals demand helped by state-led urbanisation projects.
Recent economic data has reinforced hopes for a sustained recovery, with factory output in August hitting a 17-month high, retail sales growing at their fastest pace this year and power production posting the second-highest monthly growth this year.
A manager at a large manufacturing firm, which uses refined metal to make semi-finished copper products, said its output had risen 10 per cent so far this year after orders picked up in the past few months, and it planned to raise output further next year.
China’s exports of copper products could also get support from recoveries in the United States and Europe, the manager said.
Beijing is widely expected to step up building tied to urbanisation next year after the new Chinese leadership set it as one of the priorities for growth, the sources said.
Sources at smelters said copper demand was also expected to rise because of a shortage of scrap, which has already limited production at some refined copper producers.
China’s refined copper production will also rise more than 200,000 tonnes next year if Jinchuan Group opens its new 400,000 tonne-per-year smelter in the first half, they said.
Meanwhile, aluminium consumption is expected to grow more than 10 per cent next year from about 24 million tonnes estimated for this year, two smelter sources said.
The sector should benefit from more building activity and Beijing’s efforts to boost demand to tackle overcapacity in the industry, with growth picking up from near 10 per cent this year, they said.
A manager at a plant that uses primary aluminium to manufacture semi-finished products said the firm’s local and export orders of large aluminium profiles had more than doubled this year and it expected orders to rise further next year.
The product is a new mould being used in the building industry in China to replace steel because of its longer life, the manager said, adding that the provincial government of Guizhou was considering requiring all local projects to use aluminium moulds from next year.
Demand from transport equipment makers would also rise after Beijing approved a series of rail projects this year, the sources said.
China’s State Reserves Bureau is not expected to buy aluminium for stockpiling next year, after purchasing 300,000 tonnes this year, owing to concerns about firmer local prices and in order not to encourage new production, they said.
Nonetheless, the increase in consumption may lag capacity, which is expected to grow by about five million tonnes next year.