Gulf region and India to cushion fall in copper usage

Vancouver – It is hard to believe given the bleak numbers the Lisbon-based International Copper Study Group (ICSG) is forecasting for 2009 copper usage in the four major copper-using regions – Japan, China, North America and Europe – that there could be any light at the end of the copper tube. In 2009 the ICSG expects growth in copper usage will slow to an anemic 2.9% in China and that overall usage in the four major copper-using regions will stagnate at 1.3%.

As Ana Rebelo explains it, the ICSG’s chief statistician, the coupling between China’s export dependent economy and its main export markets, North America and Europe, has come loose. “The U.S. and some countries in Europe are already in recession,” she says. “And so of course if you have a bad situation there, the exports from China will decrease and this will have an impact on the use of copper in China.”

Nor is she rosy on the outlook for production. “On the other side,” she continues, “the current financial crisis will surely have an impact on production. It will affect some mines. There will be decreasing production and closures because of low copper prices and projects will be delayed or postponed because of tight credit.”

Yet despite the sickly prognosis for growth in copper usage in the four major copper-using regions, the ICSG is still somehow managing to forecast 3.2% growth of it in 2009. It almost sounds like an accounting error. But Rebelo assures you it is not. “So what is happening is we have several (copper-wire and rod) plants starting this year and next year in the Gulf region. So the usage there will grow,” she says. “And the same in India. India is not so affected by this (financial) crisis so we still predict a high growth for India next year.”

It appears that while the Chinese, European and North American copper trains will derail or at least change to slower tracks in 2009, the Indian and Gulf economies will continue to chug along. Rebelo notes that India’s copper usage is far less dependent on the export market than China’s. The latter’s dependency stands at 30% or so. “While China is doing that, India is developing lots of internal structures and industry,” she says.

Likewise in the Gulf region several copper tube and wire plants will press metal in 2009. For instance Egypt’s El Sewedy Cables is building a US$150 million wire plant in Qatar – among others – that will have about 30,000 tonnes capacity. Notably the company does not list North America or Europe as markets for the plant’s products.

So while copper-cousins China, North America and Europe grow distant, the link between the Indian and Gulf economies should remain strong. Not only will domestic markets there boost growth, but Rebelo says the still booming construction industry in the Gulf region will continue to hunger for refined Indian copper.

She adds one, important, caveat to the ICSG’s prognostication. “This is really a very uncertain time to assess what will happen in the coming year,” she says. But still, the news that India and the Gulf region may pick up some copper slack in the coming year should add a little shine to an otherwise gloomy copper outlook.