Chinese copper demand slowing down at a time when it normally sees an uptick
- September 19, 2023
- Posted by: Quatro Strategies
- Categories: China, Mining & Metals, Rare Earths & Commodities
Copper demand in China, the world’s largest consumer of the metal, is experiencing a slowdown during a period that traditionally sees an uptick in demand. The copper market, usually a barometer of economic health, is seeing some support from the global energy transition and Beijing’s efforts to boost growth. However, consumer caution and suppressed margins are hindering a robust rebound in demand. China’s recovery from the pandemic has lost momentum, and while recent government measures have stabilized the economy, reports of lackluster demand are concerning, especially during the typically busy autumn period for copper fabricators in China.
Copper prices have been trading in a narrow range for months, reflecting the lack of momentum in China’s recovery. About a quarter of China’s copper demand comes from the construction sector, which has been significantly impacted by the prolonged crisis in the property market.
Consumer goods, accounting for 16% of copper demand, have also suffered as households have become more cautious due to economic uncertainty. On the other hand, power generation, transmission, and storage, making up 20% of demand, have seen growth, particularly in renewable energy and electric vehicles as China focuses on green initiatives.
Refined copper demand grew by 6.3% in the first half of the year, primarily driven by clean energy and appliances like air-conditioners. However, demand growth is expected to slow down in the second half of the year, potentially fading to 3.9% as China’s solar expansion slows and households reduce purchases.
This outlook suggests that the autumn peak season might disappoint. While copper fabricators have increased production, it hasn’t been accompanied by rising orders, indicating a lag in demand from end-user segments. Spot trading is satisfactory, but consumption is lagging, and premiums are falling.
The property sector, a major consumer of copper, is facing a prolonged crisis, and renewable energy, although growing, is not yet substantial enough to drive a significant difference in copper demand. For the first seven months of the year, Chinese base metals smelters and processors recorded their worst cumulative drop in profitability in over a decade.
Without more aggressive stimulus from Beijing, China’s economy might enter a phase of slower growth. Government policy support is currently stimulating demand, but there’s a need for more spontaneous consumption from consumers to drive sustained growth in the copper market in China.
By QUATRO Strategies International Inc.
QUATRO Strategies International Inc. is the leading business insights and corporate strategy company based in Toronto, Ontario. Through our unique services, we counsel our clients on their key strategic issues, leveraging our deep industry expertise and using analytical rigor to help them make informed decisions to establish a competitive edge in the marketplace.
Interested in learning more?
Sign up for Top Insights Today
Top Insights Today delivers the latest insights straight to your inbox.
You will get daily industry insights on
Oil & Gas, Rare Earths & Commodities, Mining & Metals, EVs & Battery Technology, ESG & Renewable Energy, AI & Semiconductors, Aerospace & Defense, Sanctions & Regulation, Business & Politics.
Read more insights
Congress targets US-China investments with sweeping new restrictions
Congress is preparing to vote on legislation that would significantly tighten restrictions on U.S. investments in China, as part of a broader government funding bill set to last through mid-March. The legislation builds on existing rules finalized by the Treasury Department in October, which take effect on January 2, to limit U.S. investments in key Chinese technology…
France’s offshore wind drifts as policy stalls on political turmoil
France’s offshore wind buildout has hit a political sandbar just as the industry needs clear water. A year of stalled legislation, delayed auctions and cabinet churn has left developers and suppliers facing a market pause that ripples from project finance desks to factory floors.
The backdrop is a fractured National Assembly that still hasn’t passed the next multi-year energy program (the PPE3) setting post-2026 capacity needs and support rules. Without that anchor, tenders slip, lenders balk, and boardrooms re-rank opportunities elsewhere.
China tries to lock in Gulf FTA as its economic anchor
China is effectively trying to lock in the Gulf as a long-term economic anchor, and using the stalled GCC FTA as the vehicle to do it, at exactly the moment when U.S. and EU policy is turning more protectionist and “de-risking” from China.
The GCC–China free trade agreement talks have dragged on for more than 20 years, conditions are deemed by China as “basically mature”, and Beijing wants a political decision to close. That framing is important. It tells you this is no longer about technical tariff schedules; it is about whether the Gulf is prepared to formalise China as a privileged economic partner at a time of intensifying great-power competition.