Picture: REUTERS
Picture: REUTERS

China’s overseas expansion will spread over land that is home to more than half the world’s population, potentially boosting copper use by 1.6-million tons, or roughly 7% of annual demand, major miner BHP said on Thursday.

BHP has analysed the effect of China’s Belt and Road Initiative, a network of overseas construction projects, on commodity demand on the basis of a database it constantly updates.

It said China’s overseas expansion plan covered 115 partners across Eurasia, parts of Africa, Latin American and Oceania, up from 68 countries or regions it cited in a previous blog post in September 2017.

Its latest analysis estimated the Belt and Road represented one-third of the global economy and would drive spending of up to $1.3-trillion over the decade to 2023.

Vicky Binns, BHP’s vice-president for minerals marketing, told Reuters that if anything the expectation that an extra 1.6-million tons of refined copper would be needed over the same time period was conservative.

More than 70% of that demand is from 100 power projects, which typically are not the biggest source of copper consumption — accounting for between 13% and 22% of all copper use depending on the region. Such initial investment could lead to knock-on demand from other sectors.

“Increasing the international competitiveness of manufacturing in these regions may create a major lift in future demand from copper intensive sectors, such as automobiles, consumer durables and machinery,” BHP says.

Long-term fundamentals

Binns downplayed the effects of mounting trade tensions between the US and China on demand, saying long-term fundamentals were likely to be robust.

China is expected to be a major beneficiary of increased demand because of its enormous copper-smelting capacity, but Binns said BHP was also well-placed because it can develop its own capacity and work with junior players.

The major has said the commodities in which it seeks to expand are copper and oil and in September it bought a 6.1% stake in SolGold to get access to a promising copper-gold project in Ecuador.

BHP, which operates the world’s largest copper mine Escondida in Chile, said in its 2018 report it derived 28% of its underlying earnings before interest, tax, depreciation and amortisation from copper.

Its ranking varies from year to year, but it said the latest figures make it the third-largest copper company behind Chile’s Codelco and US-based Freeport McMoRan.