China’s Renewables Growth Lifts Copper Demand as Housing Falters

(Bloomberg) -- China’s rapid build-up of clean energy is claiming more copper, supporting 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 an otherwise bleak picture for Chinese commodities consumption. Underpinning some of that demand is a long-anticipated shift in usage to feed growth across new energy sectors, from the construction of massive wind and solar projects in the interior, to the country’s electric vehicle boom. 

“Consumption in power grids and new energy including EVs are offsetting losses from traditional sectors such as home appliances,” said Ji Xianfei, an analyst with Guotai Junan Futures Co. 

Imports have risen 8.1% this year, while purchases of ore for the domestic smelting industry have climbed 9%, against yearly declines for items like crude oil and iron ore. Copper’s traditional usage in pipes and wiring remains dominant, so the shift to renewables is coming from a low base. Set against that, China’s property crisis is likely to accelerate the increase in clean energy’s share of demand.

The metal’s conductive properties mean that electricity transmission is its biggest application, accounting for 31% of consumption in China, according to data from UBS Group AG in February. Next was construction at 20%, and then appliances at 18%. Autos and renewable energy claimed only 6% and 5% of demand, respectively. 

CRU Group forecasts that China’s copper demand will rise about 0.8% this year to 15.55 million tons, with growth of more than 4% from both autos and electricity transmission countering a 4% decline in construction and a 2% drop in consumer durables. It sees copper use in EVs rising to 2.8% of the total versus last year’s 2.2%.

The rapid growth in EV sales and the massive ramp up in renewable power are going to make a relatively big contribution to copper demand, said BloombergNEF analyst Huo Yuchen. EVs consume 84 kilograms of copper per vehicle, almost four times more than a typical car, while wind turbines and solar panels require more of the metal compared to thermal power plants.

Events Today

(All times Beijing unless noted otherwise)

• China industrial profits for August, 09:30

Today’s Chart

The yuan has weakened more than 11% this year to 7.1 per dollar, leaving importers to pay an extra 12 million yuan for a capesize cargo of iron ore priced at $100 a ton compared to the start of the year, according to BloombergNEF. China imports over 80% of the world’s seaborne iron ore and is the biggest buyer of raw materials like bauxite. Manufacturers there now face the strain of higher costs on top of weak domestic demand.

Negative relationship between metals prices and USD/CNY:

On The Wire

• China Industrial Profits Slump Further as Producer Prices Slow
• China’s Jan.-Aug. Manufacturing Sector Profits -13.4%; Details
• China To Keep Supporting Consumption from Supply Side: Report
• Container Liners Could Be in for Rocky 2023 After Record 2022
• CHINA INSIGHT: Firefighting Property Rout - Policy Dashboard
• China Aluminum Output Gets Choppy as Drought Forces Capacity Cut
• WAF CRUDE: Sept. Exports to Asia Dip; China Drops, India Gains

The Week Ahead

Wednesday, Sept. 28

• APPEC conference in Singapore’s China spotlight, including speakers from PetroChina, and Rongsheng Petrochemical, 09:00

Thursday, Sept. 29

• USDA weekly crop export sales, 08:30 EST

Friday, Sept. 30

• China’s official PMIs for September, 09:30
  • Caixin’s China factory PMI, 09:45
• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30

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