Why China Makes 1 + 1 = 3

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I was never much good at maths, but it seems that 1 plus 1 really can equal 3 these days. The Times has reported that the high cost of copper now makes a British 1 penny piece worth 1.5 pence on the open market.

It will be no surprise to hear that the copper price (along with iron ore, oil and many other commodities) has in large part been driven by demand from China. I am informed that the LME price for copper is now US$8,400-8,600 / MT. The Times puts this in some perspective:

    “On the London Metal Exchange, the price of copper has surged by 80 per cent this year as investors buy into commodities on the back of disruptions to supply, strikes at mines and low stock levels.”

While prices are at a new record high, China’s impact on the copper markets has been seen for some time. We posted about the impact of a Chinese rogue trader here.

In his excellent book “China Shakes the World” (which I am half way into), James Kynge (the former FT journalist) looks at China’s emergence onto the world stage, and feels copper had a part to play. He thinks that a “tipping point”, when China seemed to have caught the world’s attention, was when copper drain covers started disappearing from cities around the world:

    “It occurred during the several weeks from February 2004 when, slowly at first but with growing velocity, manhole covers started to disappear from roads and pavements all over the world. As Chinese demand drove up the price of scrap metal to record levels, thieves almost everywhere had the same idea.”

According to Kynge, it all started in Taiwan…then Mongolia and Kyrgystan…Chicago…Scotland…Montreal…Glouster…Kuala Lumpur….well, you get the idea.

All this reminds us that China’s rapid growth demands raw materials, and that this demand is felt quickly, and sometimes painfully, around the world. Even those who are not actively doing business with China can no longer ignore “The China Factor”. So, if that includes you, give us a call!

Now to find those old coins down the back of the sofa…

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One Response to “Why China Makes 1 + 1 = 3”

  1. Archive » Hungry for Resources| China Business Blog Says:

    […] Related entries: General, Trading, Research China’s demand for resources (including copper) has been news around the world for some time…and will be having an impact on […]

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