The rapid buildup of clean energy in China is demanding more copper, propping up the market at a time when traditional sources of demand like housing are in the dumps.
Copper imports are one of the few bright spots in the gloomy picture of Chinese goods consumption. At the heart of this demand is a welcome shift in use to drive growth in new energy sectors, from the construction of large wind and solar projects in the hinterland to the country's electric vehicle boom.
“Consumption in grids and new energy, including electric vehicles, is offsetting losses in traditional sectors such as home appliances,” said Ji Xianfei, an analyst at Guotai Junan Futures Co.
Imports are up 8.1% this year, while ore purchases for the domestic iron and steel industry are up 9%, compared to year-on-year declines in commodities such as crude oil and iron ore. The traditional use of copper in pipes and wiring remains dominant, so the transition to renewables is coming from a low base. Against this background, the real estate crisis in China is likely to accelerate the increase in the share of clean energy in demand.
According to data from UBS Group AG in February, the metal's conductive properties mean power transmission is its biggest application, accounting for 31% of China's consumption. Next was construction at 20%, and then household appliances at 18%. Automobiles and renewable energy accounted for only 6% and 5% of demand, respectively.
CRU Group forecasts China's copper demand to rise about 0.8% this year to 15.55 million tons, with more than 4% growth from autos and power counters a 4% slump in construction and a 2- percentage drop in consumer durables. The use of copper in electric vehicles will grow to 2.8% of the total compared to 2.2% last year.
Rapid growth in electric vehicle sales and massive growth in renewable energy will contribute relatively large to copper demand, according to BloombergNEF analyst Huo Yuchen. Electric vehicles consume 84 kg of copper per vehicle, nearly four times as much as a conventional car, while wind turbines and solar panels require more metal than thermal power plants.
