NEW YORK Growth in Chinas power grid spending is expected to slow after investments in the sector stalled in May, Barclays Capital Plc analysts said, noting that copper could suffer.
"As the power sector accounts for around 40 percent of Chinese copper consumption, the sudden loss of momentum raises concerns that copper demand could likely run out of steam," the report said.
Spending was flat in May compared with a year earlier following a 30-percent increase in spending during the first four months of the year.
In the United States, demand has slowed sooner than usual (amm.com, June 12) despite lower copper prices, traders and buyers told AMM. In China, however, demand rose 24 percent in April compared with the previous month, in part because of the high grid investment in the first four months of the year, according to the Barclays report.
Barclays analysts were unavailable for comment, but they said in the report that the halt in spending could be exaggerated by seasonal issues, such as slower construction because of weather, and the state power grid restructuring.
Analysts now believe that the strong investments in the beginning of the year, which were due to leftover projects from 2012, will level out.
Last year, the National Development Reform Commission approved only three of 10 ultra-high-voltage projects submitted by State Grid Corp. of China, and analysts expect the commission to remain cautious on project approvals.
Grid investment growth also is expected to slow to smaller full-year targets. Total investment spending is still targeted to grow 1.1 percent compared with 2012.