china demand to provide a boost for copper

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After a brief respite in copper demand in China due to its Lunar New Year holiday, China's copper demand should again pick up. Recent data from China has fueled optimism that the country's appetite for metals demand could pick up following the holiday season. Keep in mind that any pickup in Chinese copper demand is significant as China accounts for about 40% of global refined copper demand.

Looking further into the evidence that Chinese demand for copper should pick up brings out a few important data points. First, we take a look into the recent data. Copper imports by China advanced by 2.9% in January from a month earlier as trading firms bought the metal before Lunar New Year in preparation for a recovery in demand in March. Inbound shipments of refined metal, alloy and products were 351,000 tonnes last month, the General Administration of Customs said. That compared with 341,211 tonnes in December and 413,964 tonnes a year earlier.

Last year, China announced a series of infrastructure projects that would require massive amounts of copper, which is widely used in construction and manufacturing. However, as of late November, the push to spend on new railroads, power grids and other projects didn't translate into shovels in the ground. Notably, with the transition of government power complete late last year, market participants believe Chinese officials will flip the switch on copper-intensive construction and are forecasting higher prices for the metal.

Mr Li Yusheng senior copper market analyst at Chinese state-owned metals consultancy Beijing Antaike said that looking forward, China's planned infrastructure projects should begin to strengthen copper demand in the Q3 of 2013. And while Mr Yusheng doesn't see any fresh stimulus announcements in 2012, he said new measures should be launched in 2013, mostly likely in the form of spending on railways and power grids.

Morgan Stanley forecasts that copper prices will advance 7.6% in 2013 from last year as demand in China, the US and even Europe is forecast to rise amid a supply deficit for the metal. Morgan Stanley raised its Chinese copper demand forecast to 8.4% YoY from 6.7% and expected further 5% growth in 2014.

The analysts said that China's industrial production cycle turned up in the Q4 of 2012 with infrastructure related demand and nonferrous metal output contributing strongly to increased output and higher orders. We believe this improved position will strengthen further in 2013, particularly as widespread industry destocking of finished products appears to be ending. Global demand will exceed supply by 17,000 tonnes in 2013 the fourth straight annual deficit.

Source - Seekingalpha.com

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