China's energy shortage could boost copper and aluminium demand - ANZ

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Trucks are seen at a copper mine of Jiangxi Copper in Dexing, Jiangxi province, China December 16, 2015. REUTERS/Stringer/File Photo

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Aug 25 (Reuters) - China's energy shortage could lead to higher demand for copper and aluminium as the power constraints highlighted the need for increasing grid investments, ANZ analysts said on Thursday.

Beijing had planned an increase in grid investment, but severe power shortages like the one in China's Sichuan province this month could fast-track projects aimed at delivering renewable energy projects across China, ANZ said in a report.

Copper itself is also used in solar and wind power projects.

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The rise in demand will come not only from displacing copper in power cabling, but also from the construction of solar panels, ANZ said.

"China's push for installing infrastructure to deliver 1,200 gigawatt of renewable energy capacity by 2025 would require an additional 3 million tonnes of copper, which would see annual copper demand from solar and wind increase by nearly 1 million tonnes."

ANZ's copper demand indicator started to show recovery in May and pushed into positive territory in July for the first time since January 2022, the report said.

ANZ revised up its China copper demand growth to 3.6% in 2022, from 2.2% previously, and forecast growth to rise to 6.5% in 2023 as investment in the power industry ramps up, which would keep the copper market in deficit.

Aluminium is also poised to gain.

"The investment in ultra-high-voltage lines to take renewable energy to China's major population centres is a big opportunity for the aluminium industry," it said, adding that over 12% of aluminium consumed in China goes into electrical cables.

Demand growth for aluminium, in which supply is already tight due to energy shortages in Europe, is seen growing 3.1% in 2022, an upgrade from a previous forecast of 2.6%, and 2023 growth could reach 4%.

"This should see the deficit widen, putting further upside pressure on aluminium prices," the report said.

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Reporting by Mai Nguyen in Hanoi Editing by Nick Zieminski

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