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China’s Auto Sales Growth Rate Is at the Lowest Level in 2 Years

Analyzing the Recent Copper Industry Indicators

(Continued from Prior Part)

China’s auto sales growth

Previously, we discussed that most Chinese real estate demand indicators are trending downwards. This negatively impacts steel and copper consumption. Apparently, almost a quarter of global steel is used by China’s construction sector. The automobile sector also consumes copper products. China is the world’s biggest automotive market. Vehicle sales in China (MCHI) are expected to reach 25 million units in 2015.

Copper radiators, motors, brakes, and bearings are used in the automobile industry. According to estimates, the copper content in an average mid-sized vehicle is around 50 pounds.

Sales growth slows down

The above chart shows the YoY (year-over-year) change in China’s passenger car sales. Sales grew by 3.7% in April—the lowest growth rate for passenger car sales since February 2013. However, looking at the first four months of this year, passenger car sales are up more than 7%.

While passenger car sales managed to deliver a positive sales growth rate in April, total vehicle sales declined 0.5% on a YoY basis. Please note that total vehicle sales also include commercial vehicles. Analysts track commercial vehicle sales as a leading indicator of industrial activity.

Decline is negative for the copper industry

Growth in China’s automobile market is crucial for metals like steel and copper. After the real estate slowdown, any decline in China’s automobile demand would be negative for the global copper industry.

Copper producers like Glencore Plc (GLNCY), Southern Copper (SCCO), Agnico Eagles Mine (AEM), and Vale (VALE) are negatively impacted by the slowdown in China’s copper demand.

Until now, we’ve analyzed China’s copper demand indicators. In the next part, we’ll discuss the latest trend in China’s copper production.

Continue to Next Part

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