Slowdown in Chinese Copper Demand?

Here is a good article from the Wall Street Journal ("China Slowdown Pounds Copper") highlighting the recent declines experienced by copper. The article cites a report issued last Friday by the International Copper Study Group which suggested that Chinese demand for copper could drop as much as 13% in 2010 vs. 38% growth in 2009.

With approximately one third of the world’s refined copper consumed in China, the recent 10% decline in the metal’s price should serve as a cautionary data point to those who think China’s Q1 2010 GDP growth of 11.9% is sustainable. This is particularly the case as China takes repeated measures to cool its overheated property market. In addition to raising the minimum downpayment for second homes to 50% in early April, the Chinese government just yesterday raised the reserve requirement for big banks by 50bps to 17% (the third increase since the beginning of the year).   Higher lending standards could result in tighter credit for manufacturers and construction companies, which in turn could dampen demand for the red metal.

It is always difficult to judge how these measures will ultimately impact the broader economy, but based on the recent downdraft in China’s stock market (~13.5% YTD), investors appear to be taking a cautious a view (one that I sympthasize with).