Slowing Growth or Less Use?

Amazingly often, analysts fail to distinguish between slowing growth and contraction. One could easily conclude from commentaries on the subject that China’s metal use has fallen. In reality, references to falling metal use often mean a decline in the rate of growth. Chinese zinc usage, for example, has been estimated by the International Lead Zinc Study Group to have risen 0.6% over the first nine months of 2015. The International Copper Study Group has estimated that Chinese copper usage in the first eight months was 0.5% higher. Chinese steel production over the first 10 months was 1.8% lower but even this is a modest cyclical decline by historical standards. Certainly, markets would have been stronger if Chinese growth had not decelerated but the most significant price effects have been felt where producers have been squabbling over market share and not because of a fall in Chinese use. Future large falls in raw material use cannot be ruled out but it would be premature to conclude that falling metal usage has been a primary or sole cause of existing price weakness.