China Copper Demand Growth to Slow to 5% in 2008

By Xiao Yu

Oct. 27 (Bloomberg) -- Copper demand in China, the world's biggest consumer, may grow at 5 percent this year, half the previous forecast, as the deepening global financial crisis curbs exports, an industry executive said.

Overseas buying of Chinese copper tubes used in construction and air conditioners has dropped as the world economy slows, said Duan Shaofu, copper division chief at the China Nonferrous Metal Industry Association. The group had forecast demand to grow at 10 percent.

Chinese copper producers have reduced output as the world tilts toward recession, curbing demand from builders and electric appliance makers. Tongling Nonferrous Metals Group Co., China's biggest copper smelter, and Yunnan Copper Industry Co. cut production last month. Jiangxi Copper Co. has said the financial turmoil hurt sales and raw material purchases.

``We heard from some processors that overseas orders have dropped significantly recently, forcing them to cut production,'' said Yang Changhua, analyst at Beijing Antaike Information Development Co. in Jiangxi. ``Slowing demand will lead to output cuts among smelters, and therefore falling demand for raw material imports.''

Copper in London tumbled below $4,000 a ton for the first time since November 2005 last week on deepening concern a global economic slump will damp commodities demand. The metal traded 4.5 percent lower at $3,600 a ton at 11:08 a.m. in London.

`Most Difficult'

Next year will be the ``most difficult,'' Duan said today at the China International Copper Conference in Jiangxi.

Chinese copper demand may rise between 5 percent to 6 percent in 2009, Paul Robinson, manager of CRU's nonferrous metals research, said in an interview on Oct. 23. That compares with its July forecast of 11 percent. Demand may rise 5.1 percent this year after climbing 19 percent last year, he said.

Chinese copper producers have reported declining profits because of lower processing fees and slumping prices.

Smelting capacity in China and India has expanded faster than mine production, increasing competition for raw material supplies and enabling miners to cut fees they pay smelters to make the refined metal.

Global smelters are ``suffering'' from ``historically low' fees for treating and refining concentrate, Shigeru Oi, director and executive officer, raw materials department, at Japan's Pan Pacific Copper Co. said Sept. 12. Mining companies need to understand that ``if they push TC/RCs any lower, it will kill smelters,'' he said.

Processors settled mid-year fees with mining companies at around $42 a ton and 4.2 cents a pound, according to industry executives involved in the negotiations.

Jiangxi Expands

Still, Jiangxi Copper Co., China's second-biggest smelter of the metal, is continuing with plans to expand smelter capacity by 29 percent this year to 900,000 tons, said a company executive. That would exceed Tongling Nonferrous' planned capacity of 710,000 tons, according to estimates from Beijing Antaike Information Development Co., making it the largest.

Jiangxi Copper's output for 2009 remained undecided because of a slump in prices, which had been ``too sudden and dramatic'' over past weeks, Wu Jimeng, assistant to the general manager, said today in an interview in Jiangxi.

The company said Oct. 23 it would take measures to ensure production wasn't disrupted after Tongling Nonferrous and Yunnan Copper Industry Co. cut output.

China's total smelting capacity will reach 4.8 million tons by the end of this year, growing to exceed 5 million tons by 2010, China Nonferrous's Duan said. Copper mine output will reach 1.05 million tons by 2010, meeting 26 percent of raw material needs for domestic smelting, Duan added.

To contact the reporter on this story: Xiao Yu in Beijing at yxiao@bloomberg.net