LMEWEEK-China's 2014 metals demand seen brightening, helped by building drive

Sun Oct 6, 2013 8:00am EDT

Related Topics

* Smelters see improving economy, building work boosting industrial metals

* Copper consumption may rise to 8.586 mln tonnes in 2014

* Aluminium demand seen up more than 10 percent

* Lead to benefit from e-bikes and cars, zinc less rosy

By Polly Yam

HONG KONG, Oct 7 (Reuters) - China is expected to import more refined copper in 2014 as Beijing steps up building of power networks, rail lines and low-cost homes, while domestic production is likely to be squeezed by tight scrap supply, industry sources said.

Refined copper consumption might rise 5 to 6 percent in 2014, three large end-users and producers estimated. This would take consumption to around 8.6 million tonnes, based on 8.1 million tonnes estimated for this year by state-backed research firm Beijing Antaike Information and Development Co.

Importers are likely to increase orders for term shipments in 2014 to restore stocks, after more than 0.5 million tonnes of bonded stocks were used this year, the industry sources and traders said.

This would mark a reversal from 2013 when importers cut term shipments, depressing copper prices on the London Metal Exchange, which have lost more than 9 percent so far this year to trade around $7,200 a tonne.

China's economy is expected to continue picking up speed in 2014, with metals demand helped by state-led urbanization projects.

Recent economic data has reinforced hopes for a sustained recovery, with factory output in August hitting a 17-month high, retail sales growing at their fastest pace this year and power production posting the second-highest monthly growth this year.

A manager at a large manufacturing firm, which uses refined metal to make semi-finished copper products, said its output is up 10 percent so far this year after orders had picked up in the past few months and planned to raise output further next year.

China's exports of copper products could also get support from recoveries in the United States and Europe, the manager said.

Beijing is widely seen stepping up building tied to urbanization next year after the new Chinese leadership set it one of priorities for growth, the sources said.

Sources at smelters said copper demand was also expected to rise because of a shortage of scrap, which has already limited production at some refined copper producers.

China's refined copper production will also see a rise of more than 200,000 tonnes in 2014 if Jinchuan Group opens its new 400,000 tonne-per-year smelter in the first half, they said.

ALUMINIUM

Aluminium consumption is expected to grow more than 10 percent in 2014 from about 24 million tonnes estimated for this year, two smelter sources said.

The sector should benefit from more building activity and Beijing tries to boost demand to tackle overcapacity in the industry, with growth picking up from near 10 percent this year, they said.

A manager at a plant that uses primary aluminium to manufacture semi-finished products said the firm's local and export orders of large aluminium profiles had more than doubled in 2013 and it expected orders to rise further next year.

The product is a new mould being used in the building industry in China to replace steel because of its longer life, the manager said, adding that the provincial government of Guizhou was considering requiring all local projects to use aluminium moulds from 2014.

Demand from transport equipment makers would also rise after Beijing approved a series of rail projects this year, the sources said.

China's State Reserves Bureau is not expected to buy aluminium for stockpiling in 2014, after purchasing 300,000 tonnes this year, due to concerns over firmer local prices and in order not to encourage new production, they said.

Nonetheless, the consumption rise may lag capacity which is expected to grow by about 5 million tonnes in 2014.

LEAD, ZINC, NICKEL, TIN

China's high number of cars and electric-powered bicycles will boost demand for replacement lead-acid batteries, lifting consumption of refined lead in 2014 to more than the 4.6 million tonnes expected in 2013, two sources at lead smelters estimated.

China had around 100 million cars and 140 million electric bicycles in 2013, local research reports said. About 9 kilos of lead is used in a car battery and 7.5 kilos for an e-bike.

"China has a growing pool of cars and electric bicycles, which provide solid demand for lead-acid battery replacements," said a sales manager at a large lead smelter.

The outlook for growth in zinc demand is less rosy as Beijing continues to take measures to cool the private property sector, though more rail projects should help increase demand for the metal in 2014 from about 5.5 million tonnes estimated for this year, smelter sources said.

Galvanized steel, which accounts for half of China's zinc consumption, is widely used in building and rail projects.

Demand for nickel and tin in 2014 are seen up from about 780,000 tonnes and 151,000-153,000 tonnes respectively for 2013, as local economic activities rise, the sources said. (Editing by Ed Davies)

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