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How Chinese Copper Demand Could Play Out in 2018

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Jan. 8 2018, Updated 3:32 p.m. ET

Chinese copper demand

Chinese copper demand is a key driver of copper prices (ANTO) (TECK). That’s hardly surprising since the country accounts for roughly half of global copper consumption. Let’s take a look now at the factors that could drive Chinese copper demand this year.

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Key drivers

We saw some moderation in China’s construction activity in the second half of 2017. There are also concerns that China’s construction boom, which lifted its economic activity last year, might not continue in 2018. Looking at copper, it’s more of a late cycle metal when it comes to the construction sector, unlike steel which is used in the initial stages of construction. So we might not see much of a negative impact on copper demand in 2018 from the expected slowdown in China’s construction activity (FXI).

China’s automotive sector has also been strong. Although the sales tax cut, which gave a boost to Chinese car sales, is being completely withdrawn in 2018, it might not have a major impact on China’s automotive sales. China’s industrial sector has also been reasonably strong, which could support copper demand in 2018.

Outlook

As things stand today, China’s copper demand could continue to be steady in 2018. That could lend support to global copper demand (FCX) (GLEN-L). While analysts tend to focus on Chinese copper demand, demand from the rest of the world also looks quite strong as we head into 2018. In the next part, we’ll see how copper demand in the world ex-China could play out this year.

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