Copper consumption growth in China may rebound in the next few years on accelerating demand from the renewable energy sector and special industries, according to Nexans SA, the second-largest cable and wire maker.
Consumption is likely to climb 6 per cent to 7 per cent per year in 2013-2014, compared with 4.7 per cent this year and double-digit growth in the past decade, Satrijo Tanudjojo, president of Nexans (China) Wires & Cables, said in an interview in Shanghai on February 23.
China is the world’s largest copper user and demand from its power sector accounts for almost half of consumption. The economy expanded 8.9 percent in the fourth quarter, the slowest since the second quarter of 2009 as Europe’s debt crisis curbed export demand and the property market weakened. The People’s Bank of China has reduced reserve requirements for banks twice in three months to sustain growth.
“I’m sure the government will always maintain the window where the inflation is manageable and the growth at 7 per cent or 8 per cent,” Tanudjojo said. “Cable growth will remain at the same level of GDP growth, around 6 per cent to 7 per cent and probably more because China also exports the cables.”
Copper in London has climbed 11 per cent this year, after declining 21 per cent last year, on optimism that Chinese buying will pick up after imports fell two years in a row. The nation imported a record 406,937 metric tons of the metal in December.
Clean energy
“The future of power cable will be submarine,” Tanudjojo said. “China has put a lot of efforts into renewable energy, and one of the areas which is considered to have the maximum growth potential is offshore wind farm,” which requires submarine cables to transport energy inland.
China plans to boost the share of non-fossil fuels in its primary energy consumption to 15 per cent by 2020 to rely less on more polluting sources such as coal. The 2020 renewable energy capacity targets include 100 gigawatts of wind power, the National Energy Administration said in July 2010.
Submarine cable demand will accelerate 12 percent to 14 percent a year and the market may expand to as much as 2 billion euros ($2.7 billion), Tanudjojo said. This compares with yearly growth of 6 per cent to 7 per cent in the last couple of years, which was slower than that of traditional cables, he said.
China is going to build a network of high-speed railways requiring special industry cables, pointing toward even more growth, Tanudjojo said.
No substitution
Three-month copper on the London Metal Exchange climbed to a record $10,190 a ton in February last year and fell 35 per cent to a nine-month low of $6,635 a ton in October. The contract declined 0.7 per cent to $8,471.50 a ton at 9:38 a.m. in Shanghai.
“The fluctuation doesn’t affect the demand of copper in the wires and cables production in China,” Tanudjojo said. “The tendency in China to change copper to aluminum isn’t obvious. I don’t think it will happen in the next few years.”
A record ratio of copper to aluminum may accelerate a switch by manufacturers to using the cheaper metal in cables and wires, leading to a decline of 400,000 tons a year of copper demand through substitution, or 2 per cent of global use, United Co Rusal said on February 8, citing market data the company uses in its forecasts. Aluminum in London fell 0.4 percent to $2,317.50 a ton.
Volatile prices may keep some companies waiting for a few months as Chinese industry users value copper’s transmission capacity, unlike some European users, with some starting to change copper to lower-cost aluminum, Tanudjojo said.
The China unit of Paris-based Nexans has four plants and “is looking to different facilities where we can expand our capacity in the special industrial cables,” according to Tanudjojo. The company imports submarine cable products from Japan and Norway to supply local customers.
