One issue analysist point to as a risk for copper demand is China’s housing sector, that is not the healthiest and currently receiving government support. It is worth taking a look at what this means and assess if this sector presents any real risks to global demand.
First note that China’s demand for copper is currently about 16 million MT. Of this amount, 23% goes into civil and commercial construction, so roughly 3.7 million MT per annum.
https://www.bloomberg.com/news/articles/2022-09-27/china-s-renewables-growth-lifts-copper-demand-as-housing-falters https://think.ing.com/articles/copper-all-eyes-on-china/ By 2025, current estimates are that globally, 20m units of EVs will be built per year, compared to 10m units in 2022. At 150 pounds of copper per EV, that is about 1.35 million MT total, and .675 million MT incremental copper demand.
In 2023, current estimates are that 320 GW of solar and on and offshore wind capacity will be installed about 80% higher than capacity installations in 2020. At 5000 MT of copper per GW, that is 1.6 million MT of total and about 1.3 million MT of incremental copper demand.
It is also worth point out that India’s copper demand is growing at about 30% per year, and globally, electricity grid build out are pulling in more and more copper, a trend that is only going to accelerate through 2035.
One estimate (Bloomberg NEF) estimates current copper demand to build out power grids globally is about 5 million tons (or 4.5 million MT) per annum. They forecast this to rise to 13 million tons (11.7 million MT) per annum by 2030. That means that the incremental increase in annual demand of 7.2 million MT for powers grids is roughly twice the current annual demand from China’s entire civil and commercial property sector.
https://about.bnef.com/blog/global-net-zero-will-require-21-trillion-investment-in-power-grids/
So assume for a minute that China’s civil and commercial property sector consumes 25% less copper in 2025 than 2022, a loss of only .925 MT.
From the numbers above, it seems a safe bet that EVs and alternative energy generation will generate about an incremental 1.5 to 2 million MT of copper demand. If you add in global grid investments, charging infrastructure and rising copper consumption from emerging markets other than China, like India, Vietnam, Indonesia, Nigeria, etc., I suspect that there will be at least another 1 -2 million MT of incremental demand in the short to medium term and probably 5 a 6 million tonnes within 4 or 5 years.
So net-net, even if a collapse in China’s property sector results in a copper demand loss of 1 million MT of demand (which seems very unlikely) and the energy transition (EV, alternative energy generation), grid investment and other emerging markets increase in the short term by around 2 or 3 million MT per annum, that is still a real increase in demand, particularly when you consider the bleak picture for copper supply growth going forward. Furthermore, it is doubtful China would tolerate a 25% collapse in building activity or they would have riots in the streets. In any event, as electrification and grid investments ramp up, by 2025 - 2030 they will be pulling in significantly more copper than China’s entire property sector.
My conclusion is that the Chinese property sector does not present a risk of overall year over year demand stagnation. In fact, it is really not the elephant in the room – the elephant in the room is how will the world’s copper producers even keep up.