Courtesy of Abare Economics September...

Courtesy of Abare Economics September Report

http://www.abareconomics.com/interactive/ac_sept07/htm/copper.htm


consumption to increase in China …

In the first half of 2007, world copper consumption increased by 6 per cent year on year, with China the main driver. China’s consumption of copper increased by 40 per cent year on year in the first half of 2007, reflecting continued strong growth in the economy and industrial production. Underpinned by rapid expansion in economic activity in China, output of copper intensive goods rose strongly in the first seven months of 2007. For example, production of motor vehicles, personal computers and air conditioners increased by 19 per cent, 50 per cent and 44 per cent, year on year, respectively. Over the same period, investment in fixed assets — of which new construction is a major component — increased by 27 per cent.

For the remainder of 2007 and in 2008, continued industrialisation, urbanisation and the expansion of electric power output are expected to underpin Chinese copper consumption. The power industry accounts for around half of China’s copper consumption. According to the National Development and Reform Commission, an additional 95 gigawatts of capacity — around 15 per cent of China’s 2006 installed capacity — is expected to be connected to the electricity grid in 2007.

and although US copper consumption fell in 2007 .. it goes

US copper consumption in 2008 is forecast to increase by 2 per cent to 2.1 million tonnes.

and from Hindalco Induxtries 2ns Quarterly Report issued 31 October ...


Copper

The year-to-date has witnessed good demand for copper. The world refined copper consumption growth is forecast at 4.3% for 2007, driven by China, the Gulf and Europe. The exchange stock continues to remain below normal levels and a weak US exchange rate will support current copper prices throughout 2007. The first half of 2008 may see an improvement in exchange stocks and market moving towards a balance.

The tightness in the concentrate market is the result of rapid expansion in the smelting capacity - mostly in China and India. Smelters have been buying on aggressive spot terms thereby placing miners in an advantageous position in their negotiations for fixing long-term benchmark TCRC for 2008 which is expected to be lower than 2007. Smelters with large spot exposure are not likely to meet their entire requirements and consequently production cutbacks cannot be ruled out. Increasingly smelters are scouting for participation in mine development to secure long-term concentrate contracts. New major mining projects under implementation are expected to come on-stream during 2010/11. This would change the market balance.


And so it seems to me that there are this a prospect of large amount of Chinese copper refining capacity going unused in an otherwise booming domestic market or they will be chasing spot prices as they are now ..

With 70% of production unhedged .. and production costs largely denominated in USD ( as I understand ) .. this is looking better and better..