While copper demand grew at double-digit rates over the last decade, in the medium-term demand for the metal will fall, according to the latest report from the International Wrought Copper Council (IWCC). Rising copper prices have deterred industrial users from making new purchases – with them instead choosing to subsist of high inventory levels. Many companies have chosen to substitute aluminum or other cheaper metals components in place of copper.
The IWCC said that it expects copper demand to fall as a result of decelerating economic growth in China. After double digit growth rates in Chinese copper demand last year, the IWCC expects a more modest rise of 7% this year.
Market observers are unsure as to whether China – which makes up 40% of global copper demand – will restock its inventories in the second half of this year. Economic uncertainty across the globe is hurting the copper price.
China‘s copper inventories have declined for the tenth consecutive week, but are still quoting above the five-year average. The Shanghai Futures Exchange announced that copper inventories quoted at 82,309 tonnes at the end of May, a reduction of 54% in comparison with the high of 177,365 tons in the month of March. Global demand for the red metal has averaged 16.4% per year in the past five years, but the IWCC expects global demand to be at just 8.4% in 2011 and 2012.
