Over the last several years, Chinese copper demand has been a key driver of global copper demand. The country’s growth was led by infrastructure investments that were metal-intensive. China’s demand for metals from steel to copper surged as it invested heavily in infrastructure. The construction boom also lifted the Chinese metal demand. While the markets focus on Chinese copper demand, the other half of the demand, which is the world ex-China, tends to be overlooked. In 2018, we could see a strong copper demand from the world ex-China. Let’s take a look at that in perspective.
While investors tend to look for growth in emerging economies, growth in the developed world has been fairly strong as well. The Federal Reserve raised its outlook for US economic growth in December 2017. Economic activity has been strong in the Eurozone, largely defying concerns over a hard Brexit. Looking elsewhere, economic activity has been reasonably bullish in emerging economies such as India.
Copper prices tend to be quite sensitive to global economic growth. In 2018, we could see strong copper demand from the world ex-China, which would support global copper demand (ACWI). Copper miners Freeport-McMoRan (FCX), Glencore (GLEN-L), and Southern Copper (SCCO) benefit from higher global copper demand (BHP).
The story of copper has essentially been a supply-side deficit. In the next part, we’ll see what factors could drive global mined copper supply in 2018.