HONG KONG, May 12 (Reuters) - Slowing growth in many economies and tightening credit in top metals consumer China are clouding the outlook for copper demand, industry officials and analysts said this week.
While orders for copper, used in everything from wiring to construction, have been moving at a decent pace, demand has failed to live up to the promise it showed after prices finally escaped a years-long downcycle in 2016, according to participants of the LMEWeek Asia conference in Hong Kong.
“I don’t feel strongly there will be a rebound (in copper prices),” said Shengzhang Luo, general manager at Chinese metals trader Jinchuan Maike Metal Resources Co.
“I don’t see anything to lead me to be very excited at this point.”
London Metal Exchange copper prices hit a two-year high above $6,200 a tonne in February, climbing from six-year lows below $4,400 a year earlier. They have since receded to around $5,550.
The U.S. economy grew at its weakest pace in three years in the first quarter and the nation is on track to hike interest rates this year, raising financing costs for metals users.
Concern was also raised on whether U.S. President Donald Trump would be able to follow-through on a touted infrastructure spending spree after he failed to pass a new healthcare bill.
Looking at China, industry officials said appetite for copper was being crimped by tighter credit and moves by regulators to curb the amount of U.S. dollars leaving the country.
“The indications are that there is a deleverage process underway. That is having a dampening effect on enthusiasm and optimism,” said the co-founder of metals hedge fund RK Capital Management David Lilley.
“(The question is) whether Chinese demand is going to start to turn down in a real way or if it continues to be quite strong?”
China has started gingerly tightening policy and clamping down on some types of financing to contain the risks from years of debt-fuelled stimulus, though analysts expect policymakers to move cautiously to avoid hurting growth and rocking the boat ahead of a major leadership transition later this year.
Attendees at the event said bright spots for copper demand included the growing appetite for electric vehicles, which use far more copper than gasoline-powered cars and also use the metal in their charging stations.
Beijing is targeting 2 million in annual sales for battery, plug-in and fuel cell vehicles by 2020, compared to just over 500,000 last year. (Reporting by Melanie Burton and Josephine Mason; Editing by Joseph Radford)