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Soaring sales of consumer goods such as washing machines, fridges, freezers and cars in the world outside China are expected to invigorate copper consumption and create shortages later this year.
For years now, copper prices have fluctuated with demand in top consumer China. But this year, consumption elsewhere such as in Western European countries will also be important.
Coronavirus lockdowns have meant many consumers who in previous times would have spent money on holidays, restaurants and other leisure activities are now choosing to buy electrical appliances and durable goods.
This trend is likely to hold for some months.
“We are seeing some outright growth in developed market metals consumption in the construction, consumer appliances, and automotive sectors, as COVID-19 drives home renovations and new home demand,” said Citi analyst Oliver Nugent.
Nugent expects the copper market to shift into a deficit in the second half of the year. He sees a small surplus overall for 2021, followed by deficits in 2022 and 2023.
“In 2021, the market will pay more attention to the world ex-China demand than it has arguably done for the past decade,” Nugent said. “A data point people are talking about more and more is housing starts in the United States.”
U.S. housing starts and building permits have been rising since September.
China accounts for about half of global consumption. Much of this is for goods that are shipped to other countries, as can be seen in China’s exports of refrigerators up 45% in December from a year earlier and microwave ovens up 35%.
Over the same period China’s refrigerator, freezer and washing machine output rose 15%, 36% and 11% respectively.
“Appliances made a significant contribution to Chinese copper demand,” said BoA Securities analyst Michael Widmer.
“Air conditioners, electronic products and consumer products in October to December last year accounted for just under a third of Chinese copper demand.”
Widmer expects global copper consumption to rise 6% to 24.76 million tonnes this year after a 1.3% drop last year and sees Europe’s share of this at 3.1 million tonnes, a 10% jump from 2020.