Copper demand in China, the world's top consumer and importer of the metal since 2002, is forecast to decline this year for the first time this decade due to high copper prices.

 

The National Development and Reform Commission (NDRC), China's main economic regulator, said 2006 copper demand will tumble 7 per cent year-on-year to 3.4 million tons.

 

As a result of weakening demand, the country's copper imports will fall 40 per cent to less than 800,000 tons this year, according to the NDRC.

 

The government body explained that the demand is restrained considerably by high domestic copper prices, bolstered by price hikes in the international market.

 

Domestic copper prices have remained at an average of more than 60,000 yuan (US$7,670) per ton this year, double the amount in 2005. Internationally, copper prices have surged by three-quarters to more than US$6,700 per ton due to massive speculation by funds.

 

However, analysts said the prices are unlikely to remain at such a high level next year.

 

Shang Fushan, from the China Non-Ferrous Metal Industry Association, told China Daily: "Copper prices in 2007 will decline slightly due to slowing demand and expanding production in China."

 

Many copper users in China are shifting partly to other cheap metals, such as aluminium and alloys, in order to cut costs, Shang said.

 

For example, current domestic aluminium prices range from 21,000 yuan (US$2,690) to 22,000 yuan (US$2,810), much lower than that of copper.

 

He predicted that domestic copper output will grow at least 10 per cent next year from almost 3 million tons estimated this year.

 

In 2005, output amounted to 2.6 million tons, ranking China No 2 in the world after Chile.

 

Inspired by this year's high prices, China's copper manufacturers are aggressively building new production capacity. The industry currently has a total annual production capacity of 3 million tons.

 

Li Yusheng, from Antaike Information Development Co Ltd, a Beijing-based metal industry consulting firm, said copper prices are too high to remain at this level next year.

 

"There is an overall balance between copper supply and demand in the world which will not boost prices further," Li added.

 

Encouraged by bullish prices on the international market, domestic copper producers have been increasing their exports.

 

Data from the metal association showed China's copper exports reached 228,000 tons in the first three quarters of this year, much higher than the 140,000 tons for the whole of last year.

 

To reign in exports, China last month imposed a 15 per cent tariff on overseas shipments of copper, aluminium and nickel.

 

(China Daily December 28, 2006)