Commodities | Sep 26 2008
By Chris Shaw
Given the importance of Chinese demand for the health of the global copper market, Barclays Capital decided the best way to find out how the market was really positioned was to go and take a look itself by visiting a range of wire and cable manufacturers and then report back on its findings.
What the group found was domestic demand remains quite strong, especially from the infrastructure sector, while export demand is very weak, with stockpiles quite low. The group points out this means some de-stocking has been occurring in recent months, which explains the decline in copper demand growth of late.
The outlook also appears reasonable, as the group notes 40% of domestic suppliers are expecting order levels to increase between now and the end of the year compared to only 20% who expect a fall in the same period. Supporting this view are the results from the group’s surveys taken during the trip, which broadly showed few signs yet of any real slowing in domestic demand overall.
This leads Barclays to suggest the prospects for the Chinese copper market are generally reasonable, as refined copper imports should see something of an upturn over the next few months, though it may not be as strong an upturn as many in the market have been hoping for.
In terms of price outlook, the group’s surveys in China showed most participants expect the LME cash copper price to be within the US$6,000-$7,000 per tonne range at the end of the year, which indicates participants in the Chinese market see further modest declines in the price from when the surveys were taken.
But the surveys show little in the way of any sustained weakness, which the group points out is of great importance to the global copper market given China accounts for around one-third of global demand and has been responsible for more than 80% of global demand growth so far this decade.