China Crowns Copper King

If you need more proof that the commodities world is changing just take a look at how historical patterns have shifted. The graph below shows the 5-, 15- and 30-year patterns for copper prices.

click to enlarge

The 30-year pattern shows what used to be a rule of thumb when I first got into this business—buy in November and sell in March. This was because of seasonal stockpiling during winter months leading into major building and construction projects in the spring and summer months.

In contrast, the 15-year pattern is dramatically different. This pattern shows copper prices rising from January through May and then trading pretty much sideways for the rest of the year, with modest peaks and valleys along the way. A similar pattern is drawn to represent the past five years.

The reason for the trend shift is China.

According to research from Dundee Wealth Economics, China’s copper consumption grew from about 1.8 million metric tons in 2000 to nearly 5 million metric tons in 2008. This pushed China’s share of global consumption from 13 percent in 2000 to 28.5 percent last year. In the first quarter of 2009, Dundee estimates, China accounted for 38 percent of the world’s copper usage.

Demand for copper from the other BRIC countries (Brazil, Russia, India and China) has also increased, but none nearly on the same scale as China.

For instance, Russia’s copper demand increased 300 percent from 2000 to 2008, but its overall share of global demand is still just 4 percent. India and Brazil both saw smaller consumption growth over the eight years, and in 2008 they accounted for 3 percent and 2 percent of global use, respectively.

Copper isn’t the only metal in China that is king. China also leads global consumption growth for aluminum, zinc, lead and nickel from 2000 to 2008.

Comments

[Stone Fox C...:]

wow... 38% in Q1 that is amazing. What will happen to copper when the US demands picks up. When was the last time that both China and the US had growing demand? Wasn't that all the way back to 2006?

Jul 10 04:54 PM