Singapore: Demand for copper and aluminium in Asia is likely to remain firm in 2008, led by China and India where transport and energy infrastructure projects are likely to consume huge quantities of both metals.
However, a slowdown in the construction sector in South Korea and Japan is likely to blunt consumption in those countries.
China’s continued expansion in nationwide power networks and urbanisation is expected to drive up consumption of refined copper by 8 to 9% in 2008, industry sources said.
The same factors, coupled with fast-growing auto and packaging sectors, are likely to push up China’s consumption of aluminium 30% next year. China may consume 4.95 million tonnes of refined copper in 2008 from 4.53 million tonnes this year, according to Shen Haihua, deputy general manager at Maike Futures in Shanghai.
Consumption would rise 16% this year from 3.9 million tonnes in 2006, he said. “We are very optimistic on China’s copper demand,” Shen said. He said the government’s investment in power networks would remain high, which could boost the production of copper and aluminium power cables.
“The 2008 growth should reach 7 to 8%,” Jing Chuan, chief researcher at Great Wall Futures, said. He said he believed China’s actual copper consumption would be below 10% this year although apparent consumption indicated a higher growth.
Demand in 2006 had been disguised by the release of copper stocks by the State Reserves Bureau, making last year’s apparent consumption low compared with the actual growth of below 10%, Jing said.
Market sources in China have said the state body might have sold about 300,000 tonnes of copper stocks last year in private deals, and the agency may have liquidated 800,000 tonnes between 2005 and 2006.
Beijing is believed to have a need to massively replenish its copper stocks and such purchases may kick off if world prices fall below $5,000 per tonne.
Consumption of aluminium may rise to about 14.6 million tonnes next year from about 11.25 million tonnes this year, a trade manager at a large aluminium smelter said. “That prediction is a neutral to conservative one,” he said. The manager said consumption would rise nearly 40% this year from last year.
“A 30 percent rise should be achievable,” Heng Kun, Beijing-based chief analyst at Essence Securities said of next year’s demand. He said building of high-speed railways in China was adding to demand for aluminium.
But Hu Kaixi, market analysis specialist at China International Futures warned that the country’s rising inflation may force Beijing to add tough measures to cool its robust economy in the second half of next year, which could affect domestic consumption.
Japanese demand for copper for the business year to March 2008 is expected to show solid growth given a healthy domestic economic outlook backed by robust corporate capital spending.
But the pace of the growth is not expected to be fast as originally expected, with two copper associations revising their forecasts downwards given sluggishness in the construction sector.
Copper industry souces estimated domestic demand for the metal is expected to rise to 1.33 million tonnes for the current year to March 2008, up 4.4% from a year ago. Domestic output has been rising due to efforts by Japan’s smelters to boost capacity to meet growing domestic consumption and robust exports, mainly to China.
“Demand may not reach the forecast as both cable and brass associations revised their outlook downwards, but overall consumption will exceed that of last year’s,” said a senior official at a metals industry body.
The Japanese Electric Wire and Cable Makers’ Association said last month that Japan’s demand for copper wire and cables for the fiscal year ending March 2008 was expected to grow 1.5% to 884,000 tonnes from a year earlier.
But the forecast was revised down from the group’s earlier forecast of 890,000 tonnes released in late March, largely due to slower-than-expected demand in construction, electrical machinery and automobiles in the first half of the fiscal year, but overall demand reamined bullish.
Separately, the Japan Copper and Brass Association said demand for rolled copper products was expected to reach 1 million tonnes for the year to next March, but it was revised down from the original forecast of 1.045 million.
Shipments from aluminium mills have been sluggish since the start of the year, although things have looked up in the past two months, industry data showed.
Japanese shipments of aluminium mill products inched up in August as record high temperatures in the country boosted consumption of drinking cans, while demand for construction remained weak, the Japan Aluminium Association said.
Japan is Asia’s largest net importer of primary aluminium, with demand estimated at about 2.4 million tonnes a year.