China’s building sales
In the previous part of this series, we learned that China’s real estate climate index plummeted to a fresh low in May. Though most Chinese real estate demand indicators point to a slowdown, May building sales increased 3.1% YoY (year-over-year).
This is the first time since December 2013 that building sales have increased on an annual basis, as you can see in the chart above. Real estate prices have been on a steady decline in China. A combination of lower property prices and cheaper credit may be the reason for more building sales.
Fixed asset investment
China’s fixed asset investments grew by 11.4% YoY in May, less than the median market expectation of 12%. This is the slowest growth rate in China’s fixed assets in nearly 15 years.
Meanwhile, when you look at a breakdown of fixed asset investments, some good news for copper producers becomes apparent. Investment in electrical machinery and equipment manufacturing grew by 10% YoY. And copper is, of course, widely used in electrical equipment.
Investment in electricity production and supply
Investment in the production and supply of electricity and heat generation also saw a YoY increase of 18%. Electricity generation and the transmission sector are among the major users of copper. Higher investment in these sectors is positive for future copper demand.
China is a major market for companies such as Rio Tinto (RIO), Turquoise Hill Resources (TRQ), and Freeport McMoRan (FCX). Freeport currently forms 1.16% of the iShares North American Natural Resources ETF (IGE) and 4.06% of the SPDR S&P Metals and Mining ETF (XME).
The automobile sector is another major copper consumer. How many vehicles did China produce in May? We’ll find out in our next part.