Copper, aluminum demand to grow at double-digit rates in 2011

Consumption of copper and aluminum in Brazil is expected to continue growing at double-digit rates in 2011, according to estimates from UK-based investment bank Barclays Capital.

"Adding to the recent strength in metal demand is, in our view, the initial stage of a strong infrastructure investment cycle, a dynamic set to become increasingly supportive for metal demand throughout the decade," analysts Costanza Jacazio and Roxana Mohammadian Molina said in the bank's most recent commodity flash report.

"Given recent trends and prospects for the copper and aluminum sectors to expand hand-in-hand with infrastructure growth, we project domestic demand for the two metals to increase 92% and 53%, respectively, over the next 10 years," they added.

Copper and aluminum consumption rose by 38% and 29%, respectively, in 2010 compared with the previous year. While amplified by the low activity level of 2009, the surge in demand has pushed metal consumption significantly above pre-crisis levels and signals the presence of strong underlying growth, according to the analysts.

After registering almost no growth in consumption during 2000-05, copper demand has soared and has been growing at rates of 5.4%/y since 2005, twice as fast as the world average. Aluminum and nickel have followed similar trends but on a smaller scale

"Such inflection point in metal consumption reflects Brazil's industrial and economic boom, with the associated fast rise in wealth and living standards bringing about a rapid increase in metal intensive end-user products, from packaging to cars," the analysts said.

SUPPLY LAGS BEHIND

Prospects for refined metal production are less compelling, according to the bank.

"Brazil is a net importer of refined copper and beyond a long-planned 50,000t expansion at the Caraiba Metais smelter due to be completed in a couple of years, there is no other major project due on line in the copper-processing sector. The country, therefore, is likely to remain dependent on refined copper imports," the analysts said.

In mining, local company Vale (NYSE: VALE) is scheduled to start production at its 200,000t Salobo mine next year, boosting the country's copper concentrate output as the mine ramps up.

"However, while on a country basis this addition is significant, from a global perspective Brazil remains a small copper producer, and its share of global production is set to stay below 3% for the foreseeable future," the report said.