According to related analysis, study and historical data, there also exists a close association and strong relevance between PMI and copper consumption demand. During the “Eleventh Five Year Plan” period, China’s copper processing product industry experienced fast growth, which is a result of continual growth in the demand for copper products from China’s manufacture industry. In the next five years,the steady growth of China’s manufacture industry will continue to drive effective growth in the demand for related copper products.

There is strong relevance between China’s copper demand and China’s manufacture industry;judging from the performance of China’s copper processing industry, such relevance is mainly reflected in the following three aspects:1. Fast expansion in industry scale, output increased significantly; 2. Increasingly active trade exchange, foreign trade maintains net import status; 3. Steady development in related industries, consumption demand keeps continual growth.

Firstly, in the aspect of the production of real object, in the past decade, China’s production of copper processed products maintained fast growth at an annual rate of 20.7%, the production scale of various products expanded rapidly. Especially during the “Eleventh Five Year Plan” period, the total output increased annually by 1 million tonnes, or even 2 million tonnes. This is ample evidence of the robust demand and effective growth in domestic market.However, fast industrial expansion at the same time created the homogeneity of some products and temporary overcapacity in production. According to preliminary estimate, in 2010 the overall capacity usage rate of China’s copper processed products is around 84.1%, marking a consecutive decline in third year.

Secondly, in the aspect of import/export trade of real objects, between 2001 and 2010, the import of copper processed products in 7 major categories including copper tube accessories shrank steadily since 2004, with an annual rate of 2.5%, but the export volume grew steadily,with an annual growth rate of 17.1%. During this period, China maintained net import in the import/export trade of copper processed products, but net import volume declined steadily at an annual rate of 4.5%, which shows China’s copper processed products are continually improving its competitiveness on the global market. Nevertheless, factors such as the global financial crisis, anti-dumping sanction by the US government, and even regional conflicts all affected China’s export of copper tubes, which is also the underlying causes leading to the overall decline in the import/export trade of China’s copper processed products, although this situation improved to some extent in 2010.As external demand gradually returned,China’s import/export trade of copper processed products are also recovering.

Thirdly, in the aspect of apparent consumption volume, during the past decade, the apparent consumption of China’s copper processed products grew by 17.5% annually, the consumption demand of various products all showed effective expansion. Apart from copper foil, the consumption scale of copper plate,strip & busbar, copper tube, copper rod and copper wire all reached 100 million tonnes level, wherein the apparent consumption of copper wire in 2010 topped 4.2 million tonnes.

The demand of China’s manufacture industry for copper products is mainly reflected in the production process of industrial products. Generally speaking, the consumption of China’s copper products is mainly concentrated in electricity, light industry, transportation, and IT industries. Real estate and building industry are one of the national standard industries ranking in parallel with manufacture industry. These industries have huge demand for copper products, for instance lead wire in buildings, water supply pipelines, lighting ornaments etc. Therefore, building industry is also an important sector for the application of copper products.

Meanwhile, considering the direct usage of scrap copper in the production process of copper processed products, when analyzing the application of copper products in all consumption fields, it is preferable to use metal copper as unit, in order to better understand the trends in consumption of copper processed products in all sectors.

In summary, during the “Eleventh Five Year Plan” period, the annual average growth of metal copper consumption in all sectors stayed above 10%, in which the annual average growth in transportation industry reached 22.8%. The annual average growth rates of electricity, light industry, IT, and building industry are respectively 12.7%, 11.8%, 14.4%and 13.1%. In 2010, the copper usage in the above five major copper consumption sectors are 3,891,000 tonnes, 1,900,000 tonnes,1,253,000 tonnes, 471,000 tonnes and 647,000 tonnes respectively.

In the first half of 2011, China’s copper processing industry still maintained steady growth in terms of overall performance. Nevertheless,although beginning from March both the output and apparent consumption of copper products showed fast rebound, according to relevant data the 3,818,000 tonnes of copper output, 334,000 tonnes of import volume, 214,000 tonnes of export volume, and 3,938,000 tonnes of apparent consumption in the first 5 months of the year all showed decline to varying degrees when compared with the figures in the same period last year. In particular, the import volume fell by 13.2%.

Meanwhile, China’s PMI in June 2011 is 50.9%, down by 1.1% compared with that in the previous month, recording a new low since March 2009 and moving closer to the warning line of 50%. This shows China’s manufacture industry has obviously slowed down despite its overall growing momentum, the trend of downturn in economic growth is continuing.

Judging from the performance of the three driving forces of Chinese economy in the first half of the year, regardless of investment, consumption, or import/export, the overall performance is still within the normal range despite some decline in some of the figures; at present there is still no risk for the Chinese economy to face“hard landing” or “stagflation”.

Based on overall judgment of the Chinese economy and the development of key consumption industries, Antaike has developed the opinion that although within a certain period in the future, some sectors or sub-sectors in the manufacture industry will show some slowdown in growth, it cannot change the development trend of Chinese manufacture industry to continue its growth, therefore the consumption demand for copper products will also be driven forward accordingly, and continue keeping steady growth. Among all the major application fields, transportation sector and some fields in the new energy industry will have strong demand prospects; for instance, intercity high speed railway, urban subway, and automobile in the transportation sector, and wind power,hydropower, and sea water desalination in the new energy industry.

Overall speaking, Antaike estimates that during the “Twelfth Five Year Plan” period, the metal copper consumption prospects in electricity,light industry, transportation, IT and building industry will grow by an annual average rate of 7.3%. Metal copper consumption volume will also increase from 8,602,000 tonnes in 2010 to 12,235,000 tonnes in 2015.

In the aspect of consumption structure, electricity has long been the biggest sector for the consumption of copper products. During the“Eleventh Five Year Plan” period, total consumption of various copper products in terms of metal copper equivalent used in the electricity power sector has topped 15 million tonnes,accounting for 46.9% of the total consumption of 33,748,000 tonnes. During the “Twelfth Five Year Plan” period, the copper usage of the electricity sector will still account for 45.5% of the total copper usage; on the other hand, in the total metal copper consumption of 53,401,000 tonnes, the copper usage in transportation sector will be 8,915,000 tonnes, accounting for 16.7% of the total volume, up by 3.7% over the percentage in the “Eleventh Five Year Plan”period.

Looking back at the growth history of China’s copper processing industry in the past decade,it can be argued that it is an inevitable outcome of the growth of by “Made in China” in adapting to globalized development. With the rapid growth of Chinese economy and the steady growth of consumption demand during the“Eleventh Five Year Plan” period, China’s copper processing industry is expanding continually, there are richer varieties of copper processed products, the industry structure is also improving amid constant adjustment.China’s copper processing industry has evidently narrowed its gap with world advanced standard. However, during this process, one prominent feature in the growth of China’s copper processing industry is the effective expansion of industry scale fueled by investment;this feature will become even more prominent during the “Twelfth Five Year Plan” period.

Based on regional development planning, Antaike estimates that, on the basis of projects launched at the end of 2009 and projects planned thereafter, among the 34 enterprises being monitored, within 2-3 years after 2010 they will newly add 4,150,000 tonnes of capacity of copper products (including copper wire rod), in which 3,120,000 tonnes is the capacity of copper wire rod projects, even if allowing for replacement of original production technique (e.g. upward casting method), the consumption of copper concentrate by the above projects will also increase by around 2,500,000 tonnes. Among these 34 enterprises, for 6 copper smelting manufacturers with copper product (including copper wire rod) projects, their planned newly added capacity after 2010 can reach 1,260,000 tonnes, in which the capacity of copper wire rod is 1,170,000 tonnes.

In fact, the continual expansion of industry scale has led to product homogenization to varying degrees among all major products in China’s copper processing industry at the present stage. The end result of product homogenization and overcapacity is further intensification in the industry competition,which is directly reflected on continual decline in the usage level of industry capacity as well as fast deterioration in enterprises’ profit earning ability. According to analysis, among the existing domestic production of copper processing products, the capacity utilization rate of some products always stayed around 80%, the profit margin of most manufacturers is merely 3%; difficulty in financing, difficulty to earn return on investment, and zero profit have become widespread problems among copper processing manufacturers.

It must be pointed out that, when the needs in diverse aspects of developing regional economy, enhancing product value and building up financing platform have become the force driving enterprises to seek excessive scale produc-tion, the development of the industry has deviated from its true departure point. This is because without effective support from market consumption, without voluntary adjustment, the existing overcapacity and product homogenization problems in China’s copper processing industry will evolve from potential, periodical and structural problems into real, long term,and widespread problems.

Against the macro-background of shrinkage in external demand in the aftermath of the global financial crisis, continual escalation in currency and trade disputes, as well as the necessity of adjustment in China’s economic structure, during the “Twelfth Five Year Plan” period,China’s copper processing industry will also enter a new industry transformation period.This is because under the market conditions of low-profit business operation and cross-sector competition, the industry development must make decision in choosing its direction. Only through positively promoting optimization and adjustment in product structure, promoting transformation and upgrading in enterprise development, will China’s copper processing industry achieve overall enhancement in competitiveness, and therefore enable it to make further progress on the road to fulfill sustainable industry development.