Making a house call
Sign of improved global economic health?
Etrading at around $7839/t. Standard Bank Group Economics says that could be an indication that global economic growth could be set for a rebound, if not this year then quite possibly by next year. By and large, that theory is based on the continued rampant demand for white durable goods in Asia, particularly from the fastemerging consumer classes of China and India. According to the International Copper Study Group, 50% of Asian copper demand goes to the manufacture of electrical and electronic products CONOMISTS LIKE TO JOKE that copper is the only metal with a PhD in economics, thanks to its uncanny ability to forecast global economic growth. Price movements in the metal are also a handy proxy for the health of the global economy, hence the name Dr Copper.
These qualities are largely why the metal had many economists predicting a slowdown in the global economy at the beginning of the year. By February the copper price had fallen to just US$5225/t from a record high of $8799/t in May 2006, thanks to news of higher global i nve n t o r i e s and expectations that 2007 would see a surplus of more than 100 000 t of the metal.
However, copper is again compared with just 25% in the US and 37,5% in Europe.
Standard Bank says that amounts to a structural change in the global copper market, with demand from the telecoms revolution being replaced by demand for appliances in developing economies.
Globally, the construction industry is still the metal’s biggest buyer. Figures from the London Metal Exchange show that the building industry accounts for 48% of total copper demand worldwide. That’s particularly true in the US, where 43% of copper goes into building and construction.
Globally, the other big consumers of copper are the engineering, electrical and transport industries, which comprise 24%, 17% and 7% of demand respectively.
With such a broad range of uses it’s not hard to see why Standard Bank thinks the recent up-tick in the metal’s price could be a sign of improving global economic health.