Chinese copper consumption
Previously in this series, we’ve noted that copper prices are hovering around their 2009 lows. Copper prices breached the psychologically crucial level of $5,000 per metric ton on August 18. However, prices recovered somewhat and copper managed to hold the $5,000 level at market close. Demand concerns from China seem to weigh heavily on copper prices.
In this article, we’ll explore which way Chinese copper consumption could be headed in 2015. Investors in copper producers including Freeport-McMoRan (FCX), Southern Copper (SCCO), and Teck Resources (TCK) should closely watch how Chinese copper consumption is playing out.
Will Chinese copper consumption increase in 2015?
According to a Platts report, quoting Antaike, Chinese copper consumption is expected to rise 6% year-over-year (or YoY) in 2015. The report also says that 65% of Chinese copper consumption will be driven by power generators and air conditioner manufacturers.
However, the ICSG (International Copper Study Group) estimates that Chinese copper consumption has fallen 3% YoY as of May. You can see this fall in the chart above. The ICSG also estimates that global copper consumption has fallen by 3% YoY as of May. It’s important to note that the ICSG calculates apparent Chinese copper consumption based on China’s refined copper imports.
China’s refined copper imports
China’s (FXI)(MCHI) imports of refined copper have been on a steady decline. In the first six months of 2015, China’s refined copper imports have come down more than 10% YoY. However, China’s domestic refined copper output has risen ~9% over this period.
China is now refining more copper domestically and relying less on refined copper imports.
As a result, copper demand estimates based on Chinese refined copper imports might not paint the correct picture. There are several other indicators that you should track to get a feel of Chinese copper consumption. We’ll discuss these in detail in the next part of this series.