China’s Renewable Energy Buildout Will Boost Copper Demand

Amid warnings from experts that the copper market should brace up for a supply squeeze, China’s demand for the metal is set for growth despite a slump in housing construction.

According to data from CRU Group, the growth will come from EVs and renewable energy installations, Bloomberg reports. The total demand rise won’t be a huge one, at 0.8 percent for this year, to 15.55 million tons, but growth from the auto and energy sector—specifically transmission—will be a more sizeable 4 percent, the data showed. At the same time, demand from the construction industry will shed 4 percent.

Last month, analysts from ANZ forecast that China’s copper demand could benefit from the country’s power shortages by prompting the authorities to accelerate grid update and expansion projects.

The continuing buildout of wind and solar installations will claim a large chunk of the higher copper demand, too.

"China's push for installing infrastructure to deliver 1,200 gigawatt of renewable energy capacity by 2025 would require an additional 3 million tonnes of copper, which would see annual copper demand from solar and wind increase by nearly 1 million tonnes," the ANZ analysts said in August.

Meanwhile, Europe has emerged as the main driver for copper prices, replacing China. Because of the decline in copper demand in Europe resulting from a recession in the manufacturing sector, prices for the metal have fallen and are likely to remain depressed, Reuters reported earlier this month.

According to analysts, the manufacturing downturn in Europe is and will continue be so bad that even China will not be able to make up for it with its healthier demand for the basic metal.

"The economic outlook ex-China has worsened, particularly in Europe due to the ongoing energy crisis," Marcus Garvey, analyst at Macquarie, told Reuters. "We do not think China will be able to offset the slowdown elsewhere. Inventories will build next year, but how much will be visible is difficult to say."

By Irina Slav for Oilprice.com