From Macquarie Bank and spot on:
Why is Chinese construction important? The surge in Chinese construction over the past decade has seen it rise to almost 40% of Chinese steel demand and over 20% of copper demand. With China between 40-50% of total demand, this makes it very significant in global terms. We have always said if you get China right you get metals and bulk commodities right, and understanding Chinese construction cycles goes a long way towards getting China right. This is particularly true as the commodity intensity of investment spend in China is much higher for construction than for other areas.
What do we expect from the trend in Chinese construction? For steel, we see consumption in Chinese construction as having peaked in 2013, and set to be 20% lower than this level in 2020. China’s pace of building new units was well above what trend would require in 2013. For base metals, we still see small growth owing to rising intensity of consumption in construction, in other words more kg per square metre. This is a wealth effect, as the quality of construction improves with consumer expectations. For 2016 however, we expect copper demand in construction to be negative YoY.
