With Asia Copper Week 2018 just around the corner, the event that takes place in Shanghai every  November, Jerry Jiao, Senior Vice President of China Minmetals Corporation, refers to the scenario China is facing before the so-called “trade war” of the United States, and the consequences on copper mining investments abroad.

According to the executive, it is not necessary to react in an exaggerated way to this scenario, although he does warn that there are long-term consequences if trade disputes increase and follow the slowdown in global growth. On the other hand, he said, Chinese investments abroad will continue, regardless of the current trade barriers.

The international trade order is rapidly changing, as a reaction to the restrictions and tariffs imposed by the United States and the reprisal that many countries have been forced to comply with, China and Europe in particular. What impact can this have on Chinese copper consumption?

It cannot be denied that the growing commercial tensions caused much turbulence in the copper market, but while it somewhat affects the demand in the short term, I think the biggest influence will be on the market sentiment and not on the fundamentals. The main concern in the industry is the loss of copper consumption, contained in the intensive use of machinery/equipment exported from China to the United States. Simple mathematics could lead to the general idea that we do not need to overreact to this. The USA, as a service-oriented economy, it consumes less and less metal per capita, and the trend is accelerating in some way.

In summary, the tonnage of copper needed by the whole country is less than 2 million tons per year. Since China represents a quarter of the imports of machinery and equipment in the USA, this means that approximately 500,000 tons of fine copper are imported indirectly from China, and this is approximately the amount that could be affected by the tariffs. We do not believe that the loss of 500,000 tons of copper will be a major problem, because China’s total demand is multiple. MMG’s Las Bambas copper mine produced 450,000 tons of copper last year, almost the same amount as USA imports from China. We believe that Chinese demand is solid and we have yet to exploit more projects such as Las Bambas to fill the current gap between supply and demand.

On the other hand, the United States is going to require these capital assets anyway, either from other markets or from its own production.

On the opposite side, within the context of commercial disputes that increase and continue the deceleration of global growth, the pain is in the long term. Although no product could benefit during the weakening of the world economy, copper may suffer the least. The copper business has to do with the large electric vehicle industry that is looming and the acceleration of investment in infrastructure in emerging markets. These could be the future drivers of the global economy.

Additionally, China is looking for new agreements to reduce the impact of USA policies, and let’s not forget the growth of India, which apparently, now that it is going to take off with force.

On the same topic, do you see any impact on Chinese investments abroad, especially in copper mines?

Chinese investors would like to acquire more copper projects, regardless of the current trade barriers between different countries. We are still faced with the fact that more than 60% of the copper concentrate must be imported from abroad. Such a situation would remain the same during the following decades. China only imports 400,000 to 500,000 tons of USA copper concentrate, which is equivalent to 2-3% of the total imports of copper concentrate. Therefore, it should not be a major problem, even if the USA becomes a country where Chinese investors do not want to go.

South America, Central Africa, and Central Asia are the most popular investment destinations for mining companies and Chinese resource funds. In the scenario that there will not be a commercial war all over the world, the massive copper resources in those countries will still attract Chinese investors.

More information about Asia Copper Week 2019 in: http://www.cesco.cl/en/asia-copper-week-en/