China’s power crunch could lead to higher demand for copper and aluminium as the power constraints highlighted the need for increasing grid investments, according to a note from ANZ on Thursday.
China had planned an increase in grid investment, but severe power shortages like the one in Sichuan province this month could fast-track projects aimed at delivering renewable energy projects across China, according to the note.
“China’s push for installing infrastructure to deliver 1,200 gigawatt of renewable energy capacity by 2025 would require an additional 3 million tonnes of copper, which would see annual copper demand from solar and wind increase by nearly 1 million tonnes,” the analysts said.
They raised the forecast of China copper demand growth to 3.6% in 2022, from previous estimate of 2.2%, and forecast growth to accelerate to 6.5% in 2023 as investment in the power industry ramps up, which would keep the copper market in deficit.
The growth of aluminium demand, in which supply is already tight due to energy shortages in Europe, is expected to reach 3.1% in 2022, compared to its a previous forecast of 2.6%, and 2023 growth could reach 4%. “This should see the deficit widen, putting further upside pressure on aluminium prices.”