MNI: China Copper Demand To Slow, Supply Risks, Prices Increase

Growth in Chinese copper demand will slow to 3-4% y/y in 2024, as work on electrical grids and new energy slows, however, policy support for copper intensive housing completions and new energy industries will underpin consumption into late 2025, analysts told MNI.

Policymakers’ renewed focus on completing unfinished properties and urban village renewal will support demand until next year before decreasing, said He Tianyu, a Shanghai-based senior copper analyst at CRU. He sees total copper demand up 4% y/y in 2024, with imports for ore and concentrate increasing as well.

Nomura estimated China's unfinished properties stood at 20 million units in a report last November.

Copper-heavy industries such as new energy will maintain double-digit increases, according to Ming Gong, a copper analyst at Jinrui Futures, who expects overall demand up 3% y/y, slowing from 2023's 6%, due to less grid work and a marginally slower growth rate in new energy.

The central banks’ expanded use of its pledged supplementary lending (PSL) facility to boost property sector investment in 2024 should also increase China’s overall commodity demand, a policy advisor recently told MNI. (See MNI INTERVIEW: PBOC To Boost Targeted Facilities) Several cities have also recently released “white lists” of projects that to be included in the governments new financing coordination mechanism designed to allow financing access to preferred developers.

SUPPLY TIGHT

Indicators currently show tight supply, with China’s imported copper concentrate processing fees, which move directly with concentrate supply, falling 55% in January, while port-ore inventories fell by up to 430,000 tonnes during January y/y, according to Xiao Yufei, nonferrous analyst at Nanhua Futures.

But China faces no supply shortage, Gong noted, adding that stocking by smelters before Spring Festival and African logistic issues had exacerbated the falls, which would both alleviate soon. “The smelters are not experiencing tightness despite current indicators,” He said.

PRICE UP

Copper prices globally would likely rise “less than 10% this year,” Xiao said, given that increased concentrate output from Chile, Peru, and the Democratic Republic of Congo should keep supply moderate. However, robust demand and the likelihood smelting capacity in China will increase from current 80% levels could offset the momentum.

He said the recent sudden closure of the Cobre Panama mine and a reduced output forecast by Anglo-American had added to risks.

Uncertainty over Fed interest rate cuts and supply risks would mean LME copper prices would fluctuate between USD7,400 to USD9,000 per metric tonne, Ming commented.

The Federal Reserve could begin lowering interest rates in March, given current global economic weakness and geopolitical conflicts, former senior adviser to the president at the Dallas Fed Joseph Tracy recently told MNI. (See MNI INTERVIEW: Taylor Rule Supports March Cut -Ex-Fed's Tracy)