China's industrial commodities consumption continues growth

02 Mar 2007 – China's industrial commodities consumption continued to grow in 2006 thanks to its fast economic expansion, according to the National Bureau of Statistics.

For metals, steel products consumption moved up 17.2% to 450 million tonnes while aluminium consumption climbed up 32.1% to 8.65 million tonnes.

Copper consumption however, dropped 4% to 3.72 million tonnes as high copper price restrained consumption and increased the use of aluminium as a substitute.

However, Li Yusheng, a copper expert with Beijing Antaike Information Co. Ltd said the figure might be underestimated, for the NBS's consumption is apparent consumption which is based on production, net imports and exports in 2006.

"But both China's net copper imports and exports dramatically dropped last year when domestic supplies were boosted by the State Reserves Bureau's copper sell-off, which was estimated at more than 200,000 tonnes in 2006. Therefore, the decline in net imports and exports resulted in the decline of apparent consumption," he explained.

According to Antaike's statistics, China's actual copper consumption was around 3.8 million tonnes in 2006, up 3.26% from 2005.

It predicted actual copper consumption in 2007 would be 4-4.1 million tonnes, as strong demand in the power generation sector would maintain growth momentum.

Hu Tiantong, a senior macroeconomic analyst with Bohai Securities, said China's industrial commodities demand is expected to maintain strong growth over the following few years on favorable economic fundamentals.

"Even the recent A-shares stock market sell-off will not dampen China's industrial commodity demand much, as demand is more closely linked to domestic investment growth, which so far shows no sign of a significant reversal," said the analyst.

Among other commodities, China's ethylene consumption rose 23.9% to 9.39 million tonnes while cement increased 14.5% to 1.2 billion tonnes.

China's consumption for Major Industrial Commodities in 2006:

Industrial commodities    Volume        On-year growth,%
consumed in 2006
----------------------------------------------------------
Steel products        450 million tonnes     17.2
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Copper                3.72 million tonnes    -4.0
----------------------------------------------------------
Aluminium             8.65 million tonnes    32.1
----------------------------------------------------------

Shanghai Futures Exchange copper futures closed down on Friday at RMB 57,330 ($9,726), despite gains on the London Metal Exchange after a fall of 2,575 tonnes in LME stocks.

"Prices move within a limited range," said analyst Jiang Hai, "The future trend will partly depend on domestic stocks."

Aluminium futures settled fractionally down to RMB 19,770 ($2,552) after aluminium eased on a 550 tonne rise in LME stocks.

China's copper stockpile increased 9,879 metric tonnes and aluminium stocks increased 56,522 metric tonnes this week, according to the latest figure released by Shanghai Futures Exchange.