Construction activity explains 22% of China’s demand for copper

Expert suggests that the company’s situation could cause temporary turbulence in the mineral market.

The complex situation of Evergrande, one of the main real estate developers in China, is watched with attention in the rest of the world, especially because of the indirect effect it could have on other industries, for example, copper.

China is the main consumer of this mineral in the world and, at the same time, the construction industry is one of the great generators of domestic demand since, in terms of its weight in economic activity, it is equivalent to just under 30% of that country’s GDP.

According to Juan Carlos Guajardo, Executive Director of Plusmining, this activity demands around 2.8 million tons per year, equivalent to 22% of the total, closely followed by infrastructure (1.75 billion tons), industry and transportation, among others. .

Guajardo explains that there is growing concern about an imminent Evergrande default, but although some believe that this case could “be the Chinese equivalent of Lehman Brothers, we do not believe that the comparison is adequate.”

The expert indicates that, unlike Lehman, the Chinese government is likely to “move quickly to merge the entity or perhaps even directly take control.”

Thus, in his opinion, “for copper and other assets this situation will generate temporary turbulence.”

The mineral rose 0.87% in value on Wednesday to US $ 4.30 a pound, according to Cochilco data.

Source: Diario Financiero