Construction drives up copper demand

About $2 trillion (Dh7.34trn) worth of construction projects in the GCC scheduled to be completed by 2020 are driving the global copper industry, ushering hundreds of thousands of tonnes of new demand for the red metal, the President of International Copper Association (ICA), the New York based body dedicated to promoting the usage of copper, told Emirates Business.

Industry insiders put the annual consumption of copper in the GCC at about 600,000 tonnes. This puts the estimated use of copper in the GCC by 2020 at about six million tonnes. According to CRU, a global metals and mines research company, the Middle East consumed 960,000 tonnes of copper - including scrap - in 2009.

Francis J Kane, the President of the ICA, said the demand for copper in the GCC is being primarily being driven by demand in the electricity-generating motors and power and heat conducting devices. Globally, while 10 percent of copper production is used by automobiles, about 60 to 65 per cent is used by electricity conducting devices. The rest of it is used in a mix of anti-microbial systems and other appliances.

"The GCC is a very significant market for us," Kane said.

There are three copper producers based in the UAE -Adcable in Abu Dhabi, Ducab in Dubai and Vedanta in Fujairah. Vedanta, the newest entrant into the GCC market and the London Stock Exchange (LSE)-registered Indian company, recently began producing about 100,000 tonnes of continuous copper rod (CCR) annually. Besides, there are reportedly three copper cable producers in Saudi Arabia.

Even though the UAE and the entire GCC, supported by their huge and cheap energy resources, have been a hub of metals refining or smelting for metals like aluminium and steel, it is not so for copper. There are downstream copper industries though - ones that use imported copper cathodes to produce copper rods that are used prominently in the cable industry.

However, places such as Dubai have the potential to establish smelting units of copper, Kane said. "We would love to see the industry expand in the upstream form here. Logically there is a potential," he said.

An industry insider told Emirates Business that smelting copper is not an as energy intensive project as aluminium and that has been preventing setting up of copper smelting units in the region. While Chile produces 40 per cent of world's annual copper production, China consumer about 33 to 35 per cent of it.

Global copper consumption declined 9.4 per cent or 20.5 million tonnes in 2009. In Asia, the demand declined 1.9 percent. While the demand for the red metal increased 10.9 per cent in China the last year, it rose 3.8 per cent in India.

According to International Copper Study Group (ICSG) Copper consumption in the US, European Union and Japan is expected to grow about seven per cent in 2010.

But the global demand they said is projected to fall 1.5 per cent in 2010 due to drop in demand from China.

This could push the production exceed consumption by 578,000 metric tonnes, up from 195,000 tonnes in 2009. According to the latest available figures, while the London Metal exchange had a stock of 499,300 tonnes, Shanghai copper stock stood at 189,441 metric tonnes.