Chinese Copper Demand Subdued As April Indicators Tumble
Copper Industry April Update (Part 6 of 10)
Chinese copper demand
In the last part of this series, we learned that Chinese copper inventories have been steady so far in April. Copper inventories generally start to decline after March, when China returns from the New Year’s holidays. Refined copper production increased by 12% in February on a YOY (year-over-year) basis. Along with these supply-side indicators, investors should track copper demand as well.
Real estate slowdown
Building sales are an important indicator of China’s real estate industry and so are widely tracked. The chart above shows the YOY change in building sales there. As you can see, building sales fell by 9.3% in March. This follow as 15.8% dive in February, the worst monthly drop in three years.
Building sales in China have fallen in every month since February 2014. The country’s real estate sector is clearly in a downward trend.
Negative industry impact
Copper is widely used to produce plumbing material. It’s used in making taps, valves, and other bathroom fittings. Copper is also used in water pipes and fire sprinkler systems in buildings. A slowdown in the real estate sector of course negatively impacts Chinese copper demand.
Less Chinese copper demand is negative for copper producers including Newmont Mining (NEM), Turquoise Hill Resources (TRQ), and McEwen Mining (MUX). Diversified miners such as Glencore (GLNCY) are also negatively impacted by the slowdown in Chinese copper demand.
NEM currently forms 5.49% of the Market Vectors Gold Miners ETF (GDX).
Property prices have also been weak in China. In February, new home prices fell in 66 out of 70 top Chinese cities. Lower property prices negatively impacts investor sentiment.
There are several other indicators of Chinese copper demand that you can track. We’ll discuss these in our next part.
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