China base metal demand expected to inch up next year, with prospects of a pick-up in second half

PUBLISHED : Friday, 09 October, 2015, 4:06pm
UPDATED : Friday, 09 October, 2015, 4:06pm

Most base metals will face tepid demand in China next year as the economy in the world’s largest consumer of the commodities slows, although experts see some hope appetite will strengthen later in the year.

Twelve metals producers, users and analysts see Chinese appetite for most base metals rising just slightly next year, but four said it could strengthen in the latter part of the year and one said demand for aluminium would be stoked by the mainland’s expanding transport networks.

“Domestic demand won’t be very good next year, as Beijing’s steps so far have not been enough to fire the economy in the short term,” an executive at a firm that makes aluminium and copper products said.

Slowing growth in the world’s No2 economy has hit commodity markets hard this year despite a steady stream of government stimulus measures to boost consumption.

Chinese copper demand will rise about 2 per cent this year and next year, said a manager at a large producer of copper tubes and rods. He added that high stocks of air-conditioners could mean fewer orders for tubes next year.

Chart of the day: Metals meltdown

A senior executive at a large copper smelter said demand growth would be 3 per cent to 4 per cent next year, though government projects to improve old towns would offer some support.

Those 2016 forecasts compare with preliminary growth estimates of 4 per cent to 4.5 per cent by Yang Changhua, senior analyst at state-backed research firm Antaike, which sees 2015 demand rising 5.3 per cent from 2014 to 9.18 million tonnes of refined copper.

Appetite for nickel has faltered on plunging markets for stainless steel.

“There is no big new driver for nickel demand. Car batteries are using more but the amount is small,” senior Antaike analyst Xu Aidong said. He forecasts nickel demand will rise 1 per cent to 980,000 tonnes next year, compared with a rise of about 2 per cent this year.

Slowing car markets are likely to continue to weigh on markets for lead, often used in vehicle batteries.

“The situation may only start changing in the second half of next year (when the economy may improve),” said a senior executive at smelter Anyang Yubei Gold & Lead in Henan province.

Antaike senior analyst Feng Juncong said lead consumption would probably grow by 4 per cent next year, the same as this year.

She also said zinc demand would climb 2 per cent to 3 per cent next year, from 3 per cent this year.

Analyst Yang Xiaofei at Antaike said consumption of tin could decline next year after growing by 2 per cent this year.

But aluminium could offer a ray of hope, with China Merchants Futures analyst Xu Hongping saying consumption may climb as much as 8 per cent to 32.4 million tonnes next year, compared with the 7.5 per cent growth expected this year.

She said that would largely be driven by appetite from the transport sector, with Beijing building more high-speed railway lines and industry bodies pushing for use of the light metal in trains and cars.

She also noted that aluminium demand would get a continued lift as consumers switched to cheaper aluminium-based cables and wires from copper-based ones.