Copper consumption in China, the world’s biggest user, is expected to expand this year at the slowest rate since 1997 as economic growth cools, according to Beijing Antaike Information Development Co.
Usage may increase 5 percent to about 7.7 million metric tons supported by demand from the power industry, Yang Changhua, who’s studied the market for more than a decade, said in a phone interview from Beijing. “It could turn out to be even lower, and we’re not optimistic about next year,” Yang said yesterday.
Slower demand growth will probably curb prices of the metal used to make cables and pipes, deterring mining companies such as BHP Billiton Ltd. from expansion and hurting sales at smelters including Jiangxi Copper Co., China’s largest. Premier Wen Jiabao has urged more measures to support the economy that’s targeted to grow 7.5 percent this year. The country boosted spending in 2008 to ward off the impact of the global recession.
“This time is different from 2008,” said Yang. Growth in copper demand “reached almost 10 percent as Beijing’s stimulus package boosted infrastructure construction then, but now even if there are stimulus policies, the potential for further growth is relatively small.”
Benchmark three-month copper traded at $7,620.25 a ton on the London Metal Exchange at 7:42 p.m. in Shanghai, 0.3 percent higher this year after slumping 21 percent in 2011. The contract reached a record $10,190 a ton in February last year.
“The average growth rate in the next five years will be 4 percent to 5 percent at best” as China’s potential expansion slows, Yang said. Antaike’s latest forecast was cut from an initial estimate of 6.4 percent, made at the end of last year.
Yang’s comments add to signs China’s slowdown is hurting commodities. BHP Chief Executive Officer Marius Kloppers said this month he expected long-term price declines for its products because of the Chinese slowdown. Weiqiao Textile Co., China’s largest cotton-textile maker, said on Aug. 20 that the world’s second-largest economy was at the start of a “harsh winter,” and commodities such as coal and steel were piling up.
Antaike’s outlook for copper-demand growth compares with an estimate of 4.2 percent from China International Capital Corp., according to an Aug. 22 report. Consumption may increase 6.6 percent to 8.28 million tons this year, Barclays Plc said in an Aug. 16 report, forecasting a global copper deficit.
Refined imports in the first seven months surged 67 percent to 2.14 million tons compared with a year earlier, customs data showed. Consumption growth was “very resilient,” in the first half, Max Layton, an analyst at Goldman Sachs Group Inc., said in a July 25 report. Copper will rise to $8,000 in three months and $9,000 in six months, said Goldman, which forecast a pickup in China’s economy in the second half.
China’s manufacturing may contract at a faster pace this month as a preliminary reading for a purchasing managers’ index from HSBC Holdings Plc and Markit Economics on Aug. 23 stood at 47.8. The gauge hasn’t shown an expansion since October.
Deutsche Bank AG, Bank of America Corp. and Morgan Stanley this month cut their forecasts for the nation’s gross domestic product growth in 2012. Expansion in the second quarter was 7.6 percent, the slowest pace in three years.
Copper prices are unlikely to pick up in the second half, Jiangxi Copper said yesterday as the company reported a 38 percent slump in first-half profit. The shares dropped 1.9 percent to HK$16.78 in Hong Kong, dropping for a fifth day.
— With assistance by Chanyaporn Chanjaroen, and Helen Sun