Money

Growth may support prices of commodities

(China Daily)
Updated: 2011-04-06 10:54

The booth of Aluminum Corporation of China at a trade expo in Beijing. Demand for aluminum in the construction sector accounted for more than 35 percent of total consumption last year, according to Liu Xiangmin, vice-president of Aluminum Corporation of China.[Photo / China Daily]

SINGAPORE - China's economy will maintain "stable" growth of 7 to 8 percent a year, supporting demand for commodities including aluminum and copper, said a senior official at Aluminum Corporation of China.

Demand for aluminum in the construction sector accounted for more than 35 percent of total consumption last year and is likely to maintain a similar level this year, Liu Xiangmin, vice-president of Aluminum Corporation of China, said at a conference in Singapore on Monday.

"There are many large construction projects on the national and town level in the 12th Five-Year Plan (2011-2015)," he said. "Demand will continue to grow."

China's manufacturing expanded for the first time in four months in March from February, a report showed last week, indicating that Premier Wen Jiabao is succeeding in sustaining growth while cracking down on inflation.

Related readings: Chinese copper demand set to rise  Chilean copper export shifted to China  Jiangxi Copper eyes more mines abroad  Copper price falls

China's central bank raised interest rates on Tuesday, for the second time this year, to tackle inflation and asset bubbles in the world's fastest-growing major economy.

Aluminum prices will increase as the price of oil stays high, driving up energy costs, which account for more than 40 percent of the cost of making the metal, Liu said. "It's a classic case of prices being pushed up by cost pressures. Substitution away from copper and steel in the transportation sector will also support prices."

Still, price gains will be limited by monetary tightening efforts taken by the Chinese government to tackle inflation, Liu said. Copper price increases will also be constrained by China's cooling measures, he said. Copper, at around $10,000 a ton, is trading "far above cost, and we believe prices will correct this year", Liu said.

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