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    5 views27 pages

    Chapter 2 Consumption

    Uploaded by

    Andy Rivera
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    © All Rights Reserved
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    of 27
    Chapter 2 Long-term trends in consumption Key points, '= World copper demand growth to average 3.5% until 2030 as @ number of a sine 4 dapan 4: Inconel ‘Copper: the Long Term Outlook - 2008 Esition Chapter 2 29 3:1 China: engine of world growth Consumo 60) ‘cot Geen Stor ot 7ard. ead Head tase {0 oo usson 2m 2863 3.6 Sas A731 dour Gam ose Pepaton ton. 1312 1am Vaz 1 13a S50 Taos “tala Oat Poreants 00 (200) hrs 2166 2360 2590 278 Sola eer Tae BPH Pereapts Cons) 35 40 44 5D GS 0 ab a7 am nena (mcr) veo sma are tt tars cana 2100 10a In recent years, China has accounted forthe vast majority ofthe world's copper consumption growth and the country is now the largest global copper consumer, using twice as much refined ‘copper asthe USA, the second biggest consumer, We expect China's growth to continue to _row strongly over the forecast period, with most ofthe gains cccurring before 2020. China’s level of development i now similar to Korea and Taiwan inthe early 1960s, countries which ‘went onto experience four decades af annual GDP per capita growth of 5-89. Indoed, with ‘more open and iterated economy in China this growth could be experienced fate il ‘The country's rising copper consumption has 1 dae resulted prinipally from is focus on the export of goods which consume large amounts of copper semi-fibricated products, such 98 air conditioners. Acconding fo JARN estimates, Chinese ouput of sir conditioner units was around 50 million in 2006, with 20 million being sold domestically and 27 million being exported. Total sles accounted for about 70% of world demand, estimated at 65 milion, (China is stil a large net importer of semi-fabricated products, but is semis industry is ‘developing rapidly with 2Mt of additonal capacity due online every year until 2010, China is steady net exporter of copper tube, having built up {cilities to serve the ac condtioner market. In future, China is likey to produce enough semis products to satisfy its own domestic demand without the neod foe imports, and seems st to become a net exporter of semis product. commercial tube manufeturing China has a comparative advantage as a result ofits lower cot of production (primarily as result of lower wage costs), Although wages will rise over the forecast period, we do not expect China to lose its comperative advantage (average wages wil sill ly be about 10% of those in ‘developed countries in 2030), and ther wil stil be large wage difereatials between regions in ‘China. However, overtime China will fice increased competitive pressure from other low-cost producers in India, South and East Asia and other developing countries, To date, China's ‘output hs been geared toward low-margin commodity products (uch as wite and cable), ‘Over time, we expect that China will increase production of more technologically advanced, higher margin goods as well. China is ikely to gain increasing market share inthe electronics industry, whic has been one othe fastest growing Sectors of the Chinese economy in recent _years~ this will hve an impact on other Asian economies active in the region, ‘As well as export-driven growth, however, we ineeasingly expect Chinato see copper consumption grow on the back of strong domestic demand. China i still «poor county, with 240 ‘Copper: Tho Long Term Outlook -2008 Eaton Chapter 2 ‘er capita GDP less than tenth ofthe level of developed couniees, bu it ha the potential 10 ‘maintain a strong economic growth rate throughout our forecast period. China stil has significant power and other infastrcture needs. Such a development story is not ot of line ‘with ts Asian predecessors ~ the major difference is China's sheer seal, CChinese power consumption/capita Isa fraction ofthat in daveloped ‘We expect the nature of China's copper demand to change asthe county develops. Urbanisation is stil very much in evidence; however, 38 We progress inthe forecast period ‘residential construction will decline in prominenes, whilst demand for manufacturing, office and commercial construction wil become increasingly important, ra China's urbanisation process is tle more than half complete Prgosen paar tate naar COPpan ar PPP ean se 108 ‘Copper: The Long Term Outlook -2008 Edition Chapter 2 ast China's growah pat is not without its risk and the county faces considerable economic, politcal and socal challenges. Policy makers have been generally successful ove the past, ‘hiny years, but the risks of errr and economic crisis at some stage are high. China also Faces ‘considerable environmental challenges, and itis possible that efforts to reduce is emissions ‘may also have an impact omits growth rte. 3.2 North America: shift from US, Canada to Mexico ‘Table 2.8: North America forecast consumption (209 252 2252 2207 2p ma ad sd MeO {00P 000 USS) ast es sam Hoa 13701 4am W78e5 ZaseT 2mm Popelton (rn). bo 2G ob ase 85 aa ats Pereopes GDP Goons) 6a 7.044 97.708 34552 99200 4ODIT GAB! SSGHD 9% Persona Cone) eos Gr ur er ey 87 bt 8m any aremcOP) i mee mee Sta We expect compound average growth in copper consumption of just 0.2% for North America between 2007-2030. Positive growth will come from Mexico, with copper consumption declining inthe USA and Canada, Copper consumption growth in North Amerie has grown at a much slower rate than the ceonomy over the past 20 years increasing by just 6% compared with 78% growth in GDP. The intensity of se of copper has fallen, as has annul per epita ‘consumption, which has decrease to less than Tk per hen ‘The USA and Canada have seen copper demand decline in recent yeas, a a result of migration in copper fabricating to lower cost destinations (suchas China snd Mexico). In 2007, (Canada saw refined consumption fall by 28% according o preliminary Figures, as Nexans cut ‘bck wireod production and Wolverine cease tube production inthe country. Although Mexican demand has been hit by the recent cyclical downturn inthe USA, we are ‘more bullish about the country’s longer-term prospects than that of ts neighbours given “Mexico's relative cost advantage and proximity tothe USA. In 2008, substantial new capity {is expected for air conitoning tube where, duct fsight cost, being close to the end-use market is an advantage, New projects are forthcoming from Luvata, Henan Golden Dragon and USA. Inthe ease of USA, this production was originally planned forthe USA. However, “Mexico will sill come under sif competition from Chins, where labour costs remain significantly lower. an Copper: The Long Term Outlook 2008 Etion Chapter 2 3.3 South and Central America: steady growth ‘Table 2.6: South and Central America forecast consumption (009 cot aid tom tore tite tO a8 ‘oP 200 USS) 2a 2570 2687 2761 2655 2G 3AM Sa 3a Ponclaton rn). Sor set somo sea tea aA 7 tam Pereapa Or 008) 4601 4550 457 47 4am Asm BBE Ta 29m Per ota Cons) Way ie 43 4a 4a ae 373m Inara taremcOP) 932 3a7 oon ae) aD Growth in South and Cental Ameria copper consumption has been subdued, with a CAGR of 3.5% over the last 10 years. Most fabrication takes place in Brazil followed by Chile, We ‘expect the region will sea significant increase in its intensity of use over the forecast period and we anticipate that consumption growth will sgnficatly outpace GDP growth, which is forecast o be sghiicantly lower than for other developing countries, However, we anticipate ‘that growth wil contin to be orientated mostly atthe regional masket and possibly the USA. ‘We do not expect South and Central America to become a major fabricating base, Table 2.7; EU and EEA forecast Consumption 009 80 449 feces rh iors atone {602000 uss) 28s 10509 10779 vha2s vias? stare ‘9281 18602 14% Popaiston ime). sco tse ot siz Sioa Per eapta oP (20008) suatie 2292 22554 94sm0 4100 33% Pe na Cons ba) preereevnermat ares Inert atime?) fe 3 as 0 a "Table 2.8: Rest of Europe forecast consumption 009 MO 3S 3H ass ou 20%, ‘0072000 Uso) wo aoe su aa, Population ra) 8 om 8 ‘7 eam Pereapta > (2005) a7 3070 457 4988 48 om am erent Cone) 7043 4s 4a ae ee 20m nanny sn OP) 1088 10001078 soe 120 am ‘We expect Europe fo fae the same challenge of demand migration to China and othe low-cost

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