China Subway Expansion Won't Move Base Metals Much-Analysts-Shanghai Metals Market

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China Subway Expansion Won't Move Base Metals Much-Analysts

Industry News 04:55:29PM May 14, 2010 Source:SMM

BEIJING, May 14, 2010 (DOW JONES NEWSWIRES) -- Plans to triple the size of China's subway system by 2015 may not stimulate demand on a large scale for base metals, according to a survey of analysts and industry data by Dow Jones Newswires.

"The effect is actually quite small as far as aluminum is concerned," said Michael Huang, analyst for Beijing Antaike, a state-owned metals research house. "Most of the money will go to the actual construction itself, like the tunnel works, and so on."

China plans to spend CNY1 trillion by 2015 to increase its subway tracks to 1,400 kilometers this year and 3,000 kilometers by 2015, up from 940 currently, Bloomberg reported Thursday, citing a National Development and Reform Commission official at a Shanghai industry conference.

But modern, electrically powered subway cars contain just six metric tons of aluminum each, compared to 10 tons for high-speed train rolling-stock, Huang said.

About 1,000 of such subway cars are added every year, which brings the total demand on aluminum annually from subway cars to about 6,000 tons.

Even tripling the volume would only bring up the annual demand from this sector to 18,000 tons, compared to China's output of 1.37 million tons of galvanized aluminum in April alone.

China's aluminum consumption this year is estimated at 16.5 million tons, according to the Aluminum Corp. of China Ltd., also called Chalco (ACH).

Copper used in subway cars amounts to an average of 2,300 pounds a car, or one metric ton apiece, according to the U.S.-based Copper Development Association, an industry association for market development and engineering services.

Assuming 1,000 subway cars are added a year in China, that would create an additional demand for just 1,000 tons of copper annually.

Overall demand for copper in China this year is estimated at 710,000 tons, up 12% on 2009, according to Standard Chartered Bank.

Some additional demand would come from copper's use in cable and wiring, though reliable data on such consumption in subways couldn't be ascertained.

As for steel, the stimulus effect on the production sector may also be muted.

One phase of subway line construction could call for 186,000 tons of steel, according to Xie Jinshui, an executive from China Railway No. 14 Construction Bureau Co. Ltd. quoted in a June 2009 China Business News report on subway projects. China currently produces 1.85 million tons of steel a day.

It's unclear how many average phases per line there are for the government's latest subway expansion plan.

The government has approved 25 subway systems across the country, in addition to 10 already in existence, the NDRC's industrial department deputy head, Li Guoying, said in the Bloomberg report. The NDRC couldn't be reached for comment Friday.

Shanghai Futures Exchange base metal futures were unmoved by the subway-expansion news. Copper rose 0.9% Thursday on stronger equity markets, while aluminum settled 0.1% higher. Both metals settled largely flat Friday.
 

China Subway Expansion Won't Move Base Metals Much-Analysts

Industry News 04:55:29PM May 14, 2010 Source:SMM

BEIJING, May 14, 2010 (DOW JONES NEWSWIRES) -- Plans to triple the size of China's subway system by 2015 may not stimulate demand on a large scale for base metals, according to a survey of analysts and industry data by Dow Jones Newswires.

"The effect is actually quite small as far as aluminum is concerned," said Michael Huang, analyst for Beijing Antaike, a state-owned metals research house. "Most of the money will go to the actual construction itself, like the tunnel works, and so on."

China plans to spend CNY1 trillion by 2015 to increase its subway tracks to 1,400 kilometers this year and 3,000 kilometers by 2015, up from 940 currently, Bloomberg reported Thursday, citing a National Development and Reform Commission official at a Shanghai industry conference.

But modern, electrically powered subway cars contain just six metric tons of aluminum each, compared to 10 tons for high-speed train rolling-stock, Huang said.

About 1,000 of such subway cars are added every year, which brings the total demand on aluminum annually from subway cars to about 6,000 tons.

Even tripling the volume would only bring up the annual demand from this sector to 18,000 tons, compared to China's output of 1.37 million tons of galvanized aluminum in April alone.

China's aluminum consumption this year is estimated at 16.5 million tons, according to the Aluminum Corp. of China Ltd., also called Chalco (ACH).

Copper used in subway cars amounts to an average of 2,300 pounds a car, or one metric ton apiece, according to the U.S.-based Copper Development Association, an industry association for market development and engineering services.

Assuming 1,000 subway cars are added a year in China, that would create an additional demand for just 1,000 tons of copper annually.

Overall demand for copper in China this year is estimated at 710,000 tons, up 12% on 2009, according to Standard Chartered Bank.

Some additional demand would come from copper's use in cable and wiring, though reliable data on such consumption in subways couldn't be ascertained.

As for steel, the stimulus effect on the production sector may also be muted.

One phase of subway line construction could call for 186,000 tons of steel, according to Xie Jinshui, an executive from China Railway No. 14 Construction Bureau Co. Ltd. quoted in a June 2009 China Business News report on subway projects. China currently produces 1.85 million tons of steel a day.

It's unclear how many average phases per line there are for the government's latest subway expansion plan.

The government has approved 25 subway systems across the country, in addition to 10 already in existence, the NDRC's industrial department deputy head, Li Guoying, said in the Bloomberg report. The NDRC couldn't be reached for comment Friday.

Shanghai Futures Exchange base metal futures were unmoved by the subway-expansion news. Copper rose 0.9% Thursday on stronger equity markets, while aluminum settled 0.1% higher. Both metals settled largely flat Friday.