May 25 (Bloomberg) -- Copper demand in China, the world's largest user of the metal used in pipes and wires, may gain as much as 12 percent this year and prices won't fall much further, according to Wanxiang Resources Co.'s chief analyst.
"Consumption is still strong," driven by continued economic growth, said Sheng Weimin from the unit of Wanxiang Group, the country's largest auto-parts maker. Demand, including refined and scrap copper, may climb to 8.96 million metric tons, said Sheng, who's studied metals markets for more than 15 years.
Investor concern Europe's debt crisis may derail the global recovery and China's measures to prevent its economy from overheating have hurt commodity prices, pushing London copper 8.6 percent lower this month. Stocks, metals and oil fell today, with Asian shares set for the lowest close since July 30.
"Prices have tumbled not because of fundamentals but because of economic uncertainties that exist outside China," Sheng said yesterday by phone from Shanghai. "As it stands now, copper prices don't have much further to fall."
Three-month futures on the London Metal Exchange declined 1.7 percent to $6,794 a ton at 12:07 p.m. in Singapore. The metal, which is used in cars and appliances, dropped 0.8 percent to 54,810 yuan ($8,027) a ton on the Shanghai Futures Exchange, taking the decline this year to 9.1 percent.
China's stocks have slumped 19 percent this year as the government restricted pre-sales by developers and curbed loans for people buying a third home. It's also raised minimum mortgage rates and tightened down-payment requirements for second-home purchases to reduce the risk of asset bubbles.
The "moves to tighten credit and cool the property market have hit sentiment hard, as reflected in the stock market, but in reality, we've seen little impact," said Sheng. "Property sales might have slowed but prices remain very high."
Transactions for new homes in Shanghai fell 56 percent in the month to May 16 from a month ago, to 520,000 square meters, according to Shanghai UWin Real Estate Information Services Co. Still, the average home price in Shanghai rose 21 percent to 24,833 yuan per square meter during the month, UWin said May 18.
"Demand from downstream consumers is very good, their order books are full, but they are buying hand-to-mouth because no one wants to hold too much inventory in these uncertain times," Sheng said, referring to car parts and appliance makers.
The government will extend subsidies for trade-in vehicles to the end of this year, the Shanghai Securities News reported yesterday. An economic planning official also cautioned against introducing new tightening measures, sending the Shanghai Composite Index to its biggest gain since October yesterday.
"As long as the arbitrage window stays open, imports will remain high, whether it has to do with real demand or financing, and this will support prices," said Sheng.
Trading companies often take advantage of the price difference between London and Shanghai to buy metal from overseas in order to help fund projects, such as property investment. China has raised the deposit reserve requirement ratio for financial institutions to rein in credit.
China's imports of refined copper were 1.06 million tons in the first four months of this year, according to customs data. That's similar to last year's level, which was boosted by state stockpiling and stimulus spending, according to Sheng.