China Infrastructure Construction Investment to Boost Post-Holiday Copper Prices

SHANGHAI, Feb. 8 (SMM) – Market players generally stayed out of markets ahead of the Chinese New Year holiday, but most investors are still upbeat about post-holiday copper prices.

SMM found after comparing the changes in China’s spot copper prices in recent years that post-holiday copper prices surged 2.55% and 2.57%, respectively, in merely five days in 2010 and 2011, from those before the holiday, due high investment enthusiasm. However, post-holiday copper prices slipped for five consecutive days in 2012 when markets were relatively depressed, down 1.71% from prices before the holiday.

It’s well known that China’s copper prices increased to around RMB 75,000/mt in earlier 2011, up from less than RMB 30,000/mt in earlier 2009, due to China’s investment in infrastructure construction worth RMB 4 trillion beginning in 2008. The growth rate in infrastructure construction, however, slowed to 21% in earlier 2012 from 25% in earlier 2011, as the Chinese government strengthened control on inflation. In this context, copper prices dropped after initially rising in 2012.

Therefore, it can be seen that market expectation over investment intensity will become the key basis of judging post-holiday copper prices.

China’s economy will still face a lot of difficulties in 2013 as external environment has restricted growth rate in China’s exports while Chinese consumption lacks rising momentum. The concept of urbanization is thus considered as a tool for stabilizing growth. On account of this, SMM holds the view that the environment for 2013 infrastructure construction investment is improving.

On February 6, China’s Ministry of Finance said it will use RMB 120 billion of special funds to support infrastructure construction of local transportation and ensure smooth progress of railway construction & renovation and construction of rural highway construction. This will definitely stabilize market confidence over the government’s investment in infrastructure construction.

SMM predicts that China’s economy will continue recovering and lend support to post-holiday copper prices.