Nov. 2 (Bloomberg) –Copper consumption growth in China, the largest user, will slow further next year as the economy cools, according to Beijing Antaike Information Development Co.
Refined copper consumption may rise 6.4 percent to 7.85 million metric tons in 2012, said Yang Changhua, an analyst in Antaike who has been studying the market for more than a decade. This compares with 8.5 percent growth this year to 7.38 million tons, and 11.5 percent to 6.8 million tons in 2010, Antaike's data show.
Slowing growth in China may further damp prices, which have fallen 22 percent from a February record on concern the European debt crisis will derail a global recovery. Economic expansion in China will drop to 8.6 percent in 2012 from 9.3 percent this year, according to provisional projections from the OECD in Paris. The country will account for 37 percent of copper demand this year, according to London-based Barclays Capital.
"I'm pessimistic about the demand outlook," said Liang Lijuan, an analyst at COFCO Futures Co. "Even home appliance and power sectors, which are considered as pillars of consumption growth, don't have much faith."
Tight credit and slower exports are expected to curb demand further, according to slides prepared for presentation by Yang at Antaike's annual copper conference. Less new-home starts, sluggish auto sales, and shrinking investments in railroads dragged down the consumption increase this year and may continue damp the demand next year, Yang said.
Three-month copper on the London Metal Exchange jumped 14 percent last week, the most since at least 1986, after European governments agreed to expand the region's bailout fund. It reached a record $10,190 on Feb. 15 and gained 2 percent to $7,881.25 a ton by 2:19 p.m. Shanghai time.
Refined copper production in China fell in September from a record the previous month as smelters reduced capacity and the world's second-largest economy expanded at a slower rate. Lower copper output may help ease a supply glut after imports climbed to a 16-month high as analysts expect a slowdown in real demand growth for metals.
A Chinese manufacturing index dropped to the lowest level since February 2009, bolstering the case for fiscal or monetary loosening to support the expansion of the economy. The Purchasing Managers' Index fell to 50.4 in October from 51.2 in September, the China Federation of Logistics and Purchasing said yesterday. A reading above 50 indicates expansion.
Premier Wen Jiabao said last week that economic policies will be "fine-tuned" as needed. That fueled speculation the government may ease reserve requirements for smaller banks and add fiscal stimulus, putting growth ahead of inflation risks.
Global copper output this year through August exceeded demand by 312,500 tons, up from 128,000 tons for 2010, according to the World Bureau of Metal Statistics, based in Ware, England.
Still, the longer-term outlook for Chinese demand is good, according to Goldman Sachs Group Inc. Copper prices may be "unimaginably" high in three years, with China growth spurring consumption, Goldman Sachs analyst Julian Zhu said Oct. 28.
Refined copper consumption may reach 12.5 million tons in 2015, said Zhang Ronghui, chief analyst at China Minmetals Corp. This represents a 79 percent jump from 7 million tons of real consumption this year, according to Bloomberg News calculations based on estimates by the China Nonferrous Metals Industry Association.
Prices will stay elevated and volatile in 2012 as the metal continues to be the top pick by funds, according to presentation slides prepared by Zhang for delivery at Antaike's copper conference in Jinan.