World copper demand growth to slow in 2011

SHANGHAI Sun May 29, 2011 1:59pm BST

SHANGHAI (Reuters) - Global demand growth for copper is expected to slow to 8.4 percent in 2011-12, slowing substantially from the average growth of 16.4 percent between 2005-2010, the International Wrought Copper Council (IWCC) said.

China's demand for the red metal, used extensively in the electrical manufacturing, construction and power sectors, is expected to grow by 7 percent this year, down from a double-digit growth in 2010, the general secretary of the International Wrought Copper Council Mark Loveitt said on Sunday.

The IWCC, which represents copper fabricators such as wire and tube makers worldwide, said the short-term outlook for copper remains uncertain as high prices were encouraging end-users to run down their inventories. Consumers were also reluctant to hold unnecessary inventories.

Prices at current levels have also prompted end-users in some sectors to either substitute copper with aluminum or to use smaller and thinner components, Loveitt said at an industry conference in Shanghai.

On China, which accounts for about 40 percent of global consumption, Lovevitt said it was uncertain if the world's largest consumer would undergo a large-scale restocking in the second-half of this year.

"Great uncertainties about the global economy means many end-users are unable to form a price view for the coming months, so I think they may continue to buy on a hand-to-mouth basis," Loveitt told Reuters at the sidelines of the conference.

While some analysts have recently turned bullish on China's import demand for copper due to a steady decline in stocks held at warehouses monitored at the Shanghai Futures Exchange (SHFE), others said the fall could have been due to an increase in exports instead of improved underlying demand, the conference heard.

"Stocks are falling but they are still hovering above a five-year average. The fall in stocks have also coincided with a rise in exports, so we think it may not be reflective of underlying demand," said Edward Meir, senior commodity analyst at MF Global.

Copper stocks in warehouses monitored by the SHFE fell for ten straight weeks on May 27 to 82,309 tonnes. Total stocks have dropped 54 percent from the peak of 177,365 tonnes recorded in March.

IWCC's Loveitt said slowing auto sales in China, which fell 0.25 percent for the first time in over two-years, would also weigh on copper demand.

China is the world's largest automobile market, which is a large consumer of copper.

London Metal Exchange (LME) three-month copper prices surged to a three-week high of $9,199 on Friday ahead of a long holiday weekend with the help of a weaker dollar and steady equities. It peaked at above $10,000 in February.

(Reporting by Fayen Wong; Editing by Jon Loades-Carter)