TELF AG explores the growing demand of copper and base metals in China
The role of commodities in China’s economy
According to a recent Goldman Sachs report, China’s demand for some of the major commodities is reportedly growing steadily. Finding itself needing to grapple with an unresolved real estate crisis and with the difficult management of projects related to the Belt and Road Initiative, China is reportedly placing a real bet on commodities in the hope that they can help support an economy that continues to experience very low overall growth levels.
But there are very specific reasons behind this growing Chinese interest in commodities: one of them, according to the Goldman Sachs report, has to do with the strong growth of the green economy and all related sectors, such as solar energy. Not surprisingly, China’s demand for copper has increased by 8 percent year-on-year, as seen over the past few months. The emphasis on sustainability and on the green economy had already manifested itself blatantly in the past few years, when China, in an attempt to respond in a concrete way to the West’s screeches against the Belt and Road Initiative, had progressively tried to change the spirit of the initiative, placing greater emphasis on sustainable and qualitative projects.
Today’s growth in the demand for raw materials could be a direct consequence of the recent shift that has sought to push China’s great infrastructure project into the territories of sustainability. Copper, from this point of view, is undoubtedly one of the commodities most involved in the global transition to sustainability, particularly in the renewable energy branch.
The role of copper
Indeed, in this particular sector of the Chinese economy, demand for copper has reportedly increased by 130 percent over last year precisely because of the parallel growth in demand for solar energy. Thanks in part to the support of these raw materials, China would, in fact be within a whisker of doubling its wind and solar capacities, a full five years ahead of the goals set for 2030. At present, Chinese capacities in this specific sector reach 228 GW, which is more than all other world nations combined.
In the face of the unexpected vitality of the manufacturing sector, demand for some specific base metals, such as aluminum, is also growing in China. Amid sharply rising industrial production — up 4.5 percent from last year – the value added in equipment manufacturing, specifically, rose 5.4 percent year-on-year, generating a concomitant increase in demand for and imports of aluminum and other similar base metals. According to Goldman Sachs, this trend is expected to remain unchanged even in the short term.
The report also highlights sustained increases in demand for oil, particularly thanks to a singular vibrancy in the transportation sector and from a level of domestic mobility that has reached really high rates. In this case, unlike what has already been said about copper and aluminum, oil demand levels would be expected to decline over time.
In a rather complex economic framework marked by global uncertainties and geopolitical scenarios in constant transition, a strong focus on certain commodities for China could mean the achievement of relative security, at least in some specific sectors (renewable energy first and foremost).
