US copper demand indicators
Previously in this series, we noted that China’s copper demand indicators are on a downtrend. Meanwhile, Freeport-McMoRan (FCX) gets almost half of its revenues from North America. In this final part of the series, we’ll explore how the US copper demand is shaping up.
Auto sales strong
US auto sales are still going strong, hitting a seasonally adjusted annual rate (or SAAR) of 17.46 million units in July, as seen in the chart above. Copper radiators, motors, brakes, and bearings are used in the automotive industry. According to estimates, copper content averages about 50 pounds in an average mid-sized vehicle. Strong auto sales bode well for copper demand in the United States (SPY) (VTI).
Construction spending up
Construction spending has been strong in the US, breaching the $1 trillion annualized mark for three consecutive months. Other leading indicators of construction activity include building permits and housing starts, which have also reached their pre-crisis highs.
Copper is widely used to produce plumbing parts and components, including taps, valves, and other plumbing bathroom fittings. Copper is also used in water pipes and fire sprinkler systems in buildings.
This uptick in construction activity would lead to higher copper demand. However, even strong demand in North America wouldn’t help copper producers like Southern Copper (SCCO) and Teck Resources (TCK) if copper prices remain at depressed levels.
Investors should keep a close eye on how copper prices play out in the second half of 2015.
Please visit Market Realist’s Copper page to learn more about this industry’s drivers.