De Wet noted that construction accounts for around 55% of China's total copper demand, other domestic consumption around 29% and exports adding about 16% to total demand. He said the impact of a Chinese slowdown in construction would be a decisive factor in demand, with domestic consumption needed to fill the gap.
"Although exports are perceived to be a risk to Chinese copper consumption, this sector constitutes only a modest percentage of total Chinese copper demand. We believe the real risk to copper demand remains within the construction sector," he said.
"After stabilizing over the second half of 2010 and into the first half of 2011, Chinese property sales growth started to deteriorate in September 2011. We expect sales growth to decline further during the first half of 2012. We note that most of the growth in construction has come from the private sector, with government related property development making up only a small percentage of total developments."
While some might worry that a drop-off of China’s exports could hurt Chinese copper consumption, De Wet said that the risk was not of great concern, because only 16% of China’s refined copper consumption went to exports.
De Wet also forecast growth from 25% of China’s copper consumption being used in domestically consumed products.. “If you look that retail sales continue to grow at 18% to 19% year-on-year, that is a good indication that domestically they are consuming despite tight monetary policy. We believe that copper demand for China will grow by 15% in this sector.”
De Wet forecast that the copper price would average $7,700/t during the year. “When you look at copper, probably more than many commodities, the supply side has been a big support for the prices and we do expect 2012 to be no different. And while we’re not super bullish on demand, although there is some mild growth, we believe the uncertainty in the supply side will continue to support the prices,” he said.
“Bottom line is we think supply will support the copper market, the uncertainty of that supply. We think demand is going to grow. We think we should not be too optimistic, especially during the first half of the year. There is a lot of pressure, not only the political uncertainty mainly in Europe but also monetary policy in China. We think copper will average $7,700 with good support when we go below $7,000 and we’ll probably see some destocking down, of course. But we do not think that copper above $9,000 a tonne will be sustainable for the most part for this year.”