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How China Became the Global Copper Giant

Mark O'Hara

Key Indicators Freeport Investors Should Track (Part 4 of 17)

(Continued from Part 3)

China’s top spot in copper

The US was the biggest consumer of copper in 1990, accounting for 20% of global copper consumption. China, on the other hand, accounted for only 5% of global copper consumption in 1990. China is the biggest consumer of copper now, accounting for more than 42% of global copper consumption. Japan was the second largest copper consumer in 1990 and is now the fourth largest consumer. The changing trends in copper consumption are a reflection of the new world dynamics.

China is currently the global manufacturing hub, and it has overtaken the US and Japan as premier manufacturing locations. China produces and exports a variety of appliances that contain copper. The manufacturing sector is among the major consumers of copper in China. Analysts track China’s manufacturing PMI to gauge Chinese copper demand.

Power infrastructure

The support from the Chinese government is a key factor behind the growth in that country’s copper consumption. The government’s massive investments in infrastructure help boost its copper consumption. The Chinese government invested heavily in power generation and transmission lines. The power sector is the biggest consumer of copper in China.

The above chart shows the physical properties of copper. These properties drive copper’s use and versatility in the power sector.

Housing sector

China’s real estate sector is also among the major copper consumers. The demand from the power sector is also dependent on the real estate sector to some extent, since new transmission lines must be laid for new housing projects, driving the demand for copper. The slowdown in China’s housing sector has negatively impacted copper producers like Freeport-McMoRan (FCX), Teck Resources (TCK), Glencore (GLNCY), and Southern Copper (SCCO).

FCX currently forms 3.1% of the Materials Select Sector SPDR ETF (XLB). In the next article, we will discuss China’s housing sector in more detail.

Continue to Part 5

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