China Copper Demand to Rebound on Clean Energy Use, Nexans Says
Copper consumption growth in China may rebound in the next few years on accelerating demand from the renewable energy sector and special industries, according to Nexans SA (NEX), the second-largest cable and wire maker.
Consumption of the metal is likely to climb 6 percent to 7 percent per year in 2013-2014, compared with 4.7 percent this year and double-digit growth in the past decade, Satrijo Tanudjojo, president of Nexans (China) Wires & Cables Co., said in an interview in Shanghai on Feb. 23.
China is the world’s largest copper user and demand from its power sector accounts for almost half of consumption. The economy expanded 8.9 percent in the fourth quarter, the slowest since the second quarter of 2009 as Europe’s debt crisis curbed export demand and the property market weakened. The People’s Bank of China has reduced reserve requirements for banks twice in three months to sustain growth.
“I’m sure the government will always maintain the window where the inflation is manageable and the growth at 7 percent or 8 percent,” Tanudjojo said. “Cable growth will remain at the same level of GDP growth, around 6 percent to 7 percent and probably more because China also exports the cables.”
Copper in London has climbed 11 percent this year, after declining 21 percent last year, on optimism that Chinese buying will pick up after imports fell two years in a row. The nation imported a record 406,937 metric tons of the metal in December.
“The base of these sectors is small, so we’ll probably see the growth rate jump,” forming additional demand apart from traditional cables and wires, said Qiao Bo, an analyst at Beijing Antaike Information Development Co.
“The future of power cable will be submarine,” Tanudjojo said. “China has put a lot of efforts into renewable energy, and one of the areas which is considered to have the maximum growth potential is offshore wind farm,” which requires submarine cables to transport energy inland.
China plans to boost the share of non-fossil fuels in its primary energy consumption to 15 percent by 2020 to rely less on more polluting sources such as coal. The 2020 renewable energy capacity targets include 100 gigawatts of wind power, the National Energy Administration said in July 2010.
Submarine cable demand will accelerate 12 percent to 14 percent a year and the market may expand to as much as 2 billion euros ($2.7 billion), Tanudjojo said. This compares with yearly growth of 6 percent to 7 percent in the last couple of years, which was slower than that of traditional cables, he said, adding that the nation’s plan to build a network of high-speed railways requires special industry cables.
Three-month copper on the London Metal Exchange climbed to a record $10,190 a ton in February last year and fell 35 percent to a nine-month low of $6,635 a ton in October. The contract fell 0.9 percent to $8,450 a ton at 4:47 p.m. Shanghai time.
“The fluctuation doesn’t affect the demand of copper in the wires and cables production in China,” Tanudjojo said. “The tendency in China to change copper to aluminum isn’t obvious. I don’t think it will happen in the next few years.”
A record ratio of copper to aluminum may accelerate a switch by manufacturers to using the cheaper metal in cables and wires, leading to a decline of 400,000 tons a year of copper demand through substitution, or 2 percent of global use, United Co. Rusal said Feb. 8, citing market data it uses in forecasts. Aluminum in London fell 0.3 percent to $2,319 a ton.
Volatile prices may keep some companies waiting for a few months as Chinese industry users value copper’s transmission capacity, unlike some European users, with some starting to change copper to lower-cost aluminum, Tanudjojo said.
The China unit of Paris-based Nexans has four plants and “is looking to different facilities where we can expand our capacity in the special industrial cables,” according to Tanudjojo. The company imports submarine cable products from Japan and Norway to supply local customers.
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