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China copper demand to rise on surging EV output, power investment

Kitco News


SINGAPORE, Nov 23 (Reuters) - Copper demand in China, the world's top consumer of the metal, will grow faster in 2023, thanks to rising investment in renewable power projects and production of electric vehicles while the country's expected reopening is seen boosting growth, analysts said.


China's stringent measures to curb the spread of the coronavirus pandemic as well as a deepening slump in the country's huge real estate sector have weighed on refined copper demand in 2022. But it is expected to ease some COVID-19 curbs next year, offering some respite to the world's second-largest economy.


A slump in copper consumption in the construction sector has been more than outweighed by demand from the power grid and auto sector, according to state-backed Minmetals Economic Research Institute.


China's 2023 copper consumption is set to increase by between 110,000 tonnes and 120,000 tonnes compared with an expected rise of between 50,000 tonnes and 70,000 tonnes this year, Zuo Geng, chief researcher at the institute said on Wednesday at the CRU World Copper Conference Asia in Singapore.


"As demand for copper from the new energy field is beyond expectation, demand for copper in China is still robust and even climbs up a bit," he said.


Zuo said investments in China's power grid and power supply projects this year were higher than in the previous three years, adding about 180,000 to 200,000 tonnes of demand.


That more than compensated for the decline in copper demand from the real estate sector of up to 130,000 tonnes.


Zuo did not give total consumption figures for each sector. China's total consumption of refined copper was 12.5 million tonnes in 2021, according to the World Bureau of Metal Statistics, and 10.7 million tonnes for the first nine months of this year.


AUTO SECTOR DEMAND


Copper demand from the auto sector is set to rise by as much as 160,000 tonnes next year, said Zuo, after demand growth of between 100,000 and 120,000 tonnes in 2022.


Auto production recovered in China in the third quarter, driven by the electric vehicle sector, said Zuo. In the first three quarters of 2022, EV production has already exceeded the whole of last year's output by 700,000 vehicles, he added.


China's expected reopening from pandemic restrictions will also give copper consumption a boost of about half a percent, Nicholas Snowdon, metals strategist at Goldman Sachs said at the same event.


China eased COVID-19 curbs earlier this month but has since tightened some restrictions as coronavirus cases mount. The restrictions, as well as an ongoing slump in China's property sector, have weighed on copper demand.


Government measures to support and stabilise the country's property sector are expected to help but the sector would require a longer time to recover, "possibly one or more quarters", said Amelia Xiao Fu, head of Commodity Markets Strategy, Bank of China International.


"(The) measures have more impact in stabilising developers and avoid systemic risk, rather than give an immediate boost in terms of demand," she said.


"The key for demand is people's confidence... to go into the market and purchase a new housing unit. That confidence probably needs a longer time to restore."


Fu added that China's infrastructure sector saw "very healthy growth" which offset the decline in copper demand in the property market.


(Reporting by Emily Chow, Mai Nguyen and Florence Tan; Writing by Dominique Patton; Editing by Ana Nicolaci da Costa and Emelia Sithole-Matarise)

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