Global copper goliath Chile said that Chinese demand for the metal is holding up despite a slowing of China’s economic growth signaling a continuation of market dynamics that have driven consumption for over a decade.
Mr Pablo Wagner deputy mining minister of Chile said that “We have not seen a relevant decrease with respects to the Chinese market. To forecasts for a rise in overall copper exports in 2012 of between 5% and 6% over the year earlier period. Signs of demand, shipments and inventories, continue to be solid.”
Chile exports about 53% of its copper to China giving it one of the clearest insights into the demand patterns of the giant Asian economy that has devoured the red metal as it fuels booming economic growth and urbanization.
Mr Wagner said that demand in China is being driven by its telecommunications and energy industries and could pick up steam with new home construction. Our copper exports will be greater this year than in 2011, and obviously that is being driven to an important degree by China.
China moved to slow its economic growth in recent months, adopting policies to fight inflation, which grounded some infrastructure and construction projects. But experts point to signs it could loosen controls again, like it did earlier this month when China’s central bank cut benchmark interest rates by a quarter of a percentage point.
It was the first such cut since 2008, bringing the 1 year borrowing rate to 6.31% giving a small albeit shortlived boost to the prices of key commodities it consumes like copper.
Copper prices have retreated sharply from record levels of a year ago but they are still trading several times higher than in the early 2000s before China started its spending spree for the metal used in everything from electrical wiring to plumbing and roofing materials.
Mr Wagner predicted that prices will end, on average between USD 3.50 per pound and USD 3.70 per pound this year still well above the cost of production ranging between USD 2 per pound and USD 3 per pound for higher cost producers. By comparison, copper was trading at around USD 3.30 a pound after rising to USD 4.65 per pound in February last year.
The price dipped to 60 cents a pound in 2003, before the so called supercycle of demand for commodities started picking up steam. Because the metal is so widely used in modern economies, experts have dubbed it Dr. Copper, with its price ebbs and flows often a key indicator of whether an economy is heading toward growth or a slowdown.
Source - The Globe and Mail.com
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