The biggest whale in the copper marketplace promotes the hypothesis of a major change

The prospect of large-scale replacement of copper in China’s energy networks will have a significant impact on global demand, and some investors are citing this as a reason to trust the broad consensus for rising shortages and rising copper prices. Within the coming years. China is the region’s largest consumer of copper, with more than a quarter of the worldwide supply going to Chinese electric cables.

Still, investors and trade executives said it is some distance from sunlight that such a rudimentary effort is underway — small-scale replacement of higher-priced copper has been a long-running theme in the market, and Consider the cost each time there is a tendency to attract additional. Others suggested that this change in lifestyle was merely a brief response to rising costs.

“This is not a new topic in China, but it has been going on for years without significant progress from the state grid,” said Chenfei Wang, head of twine and cable at the CRU team in Shanghai. “Whenever copper prices rise the topic becomes ‘hot’.”

Copper retreated nearly 13% from a potential record at $11,104.50 a tonne in London steel trade amid profit-taking amid the funding budget and sluggish Chinese demand. Futures fell 1.6% to $9,653.50 a tonne by 3:37 p.m. in London.

Copper has been the metal of choice for power generation since the days of Thomas Edison, but aluminum – less conductive but also lighter and cheaper – has long been worn as a replacement metal. Since aluminum is less conductive, aluminum cable must be better than copper cable to transmit the same amount of electrical energy.

For uses where weight is noticeable but there are no constraints on size, such as overhead power transmission lines, aluminum is often used. The size of the location is at the highest rate, the equivalent of underground cabling in city facilities, copper wins. Aluminum is also known to be less protective, which was cemented in the 1970s as high copper prices increased the quality of aluminum in household wiring and the potential for electrical fires.

Globally, replacement would reduce copper intake by about 1% to 1.5% per life per decade of opportunity, according to a recent presentation by the World Copper Association.

At the moment the worldwide copper market is comfortably equipped – largely due to weak buying in China – there is a widespread view that the industry is headed for widespread losses in the coming years, which could send prices rising dramatically.

In China, copper is legally required for certain types of wiring or energy use year round, so investors remain alert for any signs of a policy change.

The region’s largest utility, Atmosphere Grid, provides electric power to more than 80% of China. On the other hand, it only uses domestic tenders for some purchases, or even the nearest one does not always highlight whether it is purchasing aluminum or copper wire, making purchasing selection difficult to track. It happens.

However, several analysts and trading executives said Atmosphere Grid has slowed purchases of copper and cord cable in recent months as copper prices hit fresh records on the back of bullish buyers.

A major grid provider said his company’s copper cable sales dropped nearly 20% in the second quarter.

Climate Grid’s insulated metal energy cable tenders slowed from April due to high copper prices, although some work has restarted and prices have eased, CRU’s Wang said.

Meanwhile, sales of aluminum cables were growing rapidly. Atmosphere Grid’s tenders for aluminum cables rose 40% to 718,000 lots in the first four months of its life, according to the Shanghai Metals Marketplace.

And there was increasing discussion about using aluminum in place of copper.

Already in China, as in most regions, aluminum is used in high-voltage overhead power cables, where its light load is an advantage. However, according to information presented at a trade conference organized by the China Nonferrous Metals Trade Association in Shanghai on July 3, China still uses about 7.5 million lots of copper in electrical cables, while 3 million lots in aluminum. . ,

suitable day

“It is an opportune time to promote aluminum replacement for copper,” Ge Honglin, president of the association, said at the conference today, noting the country’s abundant aluminum sources, long dependence on copper imports and aluminum’s financial competitiveness over copper. GE said aluminum has completed “industrialization” properties in low-voltage grids.

Atmosphere Grid, a cable provider, has increased its aluminum purchases by nearly 50% in the past few months, according to a person familiar with the matter. However, he cautioned that the increase in demand for aluminum cables appears to be for benefits at development sites – and therefore short-term installation – rather than benefits in the energy grid.

Atmosphere Grid did not respond to a request for comment.

The region’s state-owned cable maker, Italy’s Prysmian SpA, may also be skeptical about the prospects for a widespread, global shift toward aluminum, except if the business faces a real shortage of steel.

Prysmian’s customers in fast-growing areas of use – such as ultra-high-voltage cables to connect fresh renewable projects to regional grids, or cables for benefits in artificial intelligence information centers – prefer copper because it is more environmentally friendly. is favorable and important, said Maria Cristina Bifulco, Critical Sustainability Officer

“To be honest, we haven’t seen any changes due to concerns about potential shortages or the price of copper,” he said.

However, it is clear that rising copper prices are having an impact on some corners of the market. “Thrifting,” some of which involves aluminum substitution, has already reduced copper demand by 400,000 lots, Citigroup Inc. analyst Max Layton said in a recent interview.

“The likelihood of a policy change is increasing in our view,” Citigroup analysts wrote in a contemporary note. “If large-scale replacement of aluminum is realized, there is a risk that copper price upside will be limited.”