Chindia's Demand for Base Metals to Remain Strong in 2008
By Jon A. Nones
10 Apr 2008 at 05:02 PM GMT-04:00
resourceinvestor.com
SEATTLE (ResourceInvestor.com) -- China and India led the world in consumption of aluminium, copper, nickel, lead and zinc in 2007. This year, demand is expected to rise further despite a looming U.S. economic recession.
GPD growth in United States eased from 2.9% in 2006 to 2.2% last year. In its report on World Economic Outlook, the International Monetary Fund (IMF) argued that the U.S. could fall into recession in 2008, with GPD decelerating to 0.5%.
China, on the other hand, recently revised up its GDP growth for 2007 to 11.9% from the initially stated figure of 11.4%. The IMF said on Wednesday it expected China's GDP growth to slow slightly to 9.3% in 2008, still a rapid rate by global standards.
India's GDP grew at a scorching 9.6% in 2006-07, against 9% in the previous year. It is expected to moderate to 8.7% in 2007-08, after slowing modestly to 8.5% in the second half of last year, according to the IMF.
The IMF said world growth may slow to 3.7% in 2008 from 4.9% in wake of financial crisis. However, growth in Asia as a whole is expected to remain robust at about 7.5% in 2008 and 7.8% in 2009, compared with 9.1% in 2007.
In a Reference Handbook Update of Metals and Forest Products by Dundee Wealth Economics, a Dundee Wealth Inc. company, entitled “World Production, Consumption and Prices of Selected Commodities,” authors Julie Leng, Junior Economist, and Dr. Martin Murenbeeld, Chief Economist, contend that Chindia’s demand for metals will continue to grow.
“Chindia is a stabilizing force and some ‘decoupling’ should see the price of commodities not sag much – if at all,” Murenbeeld told RI.
Source: World Bureau of Metal Statistics
China’s Base Metals Consumption
China is now the world’s largest consumer of copper, nickel and zinc, and it is among the largest consumers of many other metals as well, according to the report. The country has one of the world’s fastest growing auto, battery and packaging sectors, and is rapidly building railroads, power networks and other infrastructure.
China’s consumption of refined aluminium rose 42.77% in 2007. The aluminium consumption in China increased from 0.28 million tonnes in 1974 to 12 million tonnes in 2007. China’s aluminium consumption per capita jumped from 0.68 pounds per capita in 1974 to 20.58 pounds per capita in 2007.
China’s consumption of refined copper grew by 34.67% in 2007. The demand continued climbing from 0.29 million tonnes in 1974 to 4.9 million tonnes in 2007. The consumption per capita rose from 0.71 pounds per capita in 1974 to 8.1 pounds per capita in 2007.
China’s demand for nickel climbed to 352,904 tonnes last year, up 46.98%. The metal is linked to the production of stainless steel, with 60% of nickel usage going to stainless steel worldwide. The National Development and Reform Commission (NDRC) said in a statement that China became the world’s largest producer of stainless steel in 2006 with an output of 5 million metric tonnes.
The country’s zinc consumption rose 15.09% to 3.6 million tonnes in 2007. Zinc consumption per capita rose from 0.48 pounds per capita in 1974 to 5.98 pounds per capita in 2007. Zinc-plated steel for motor vehicles accounts for approximately 40% of China’s total zinc consumption.
In 2007, China consumed around 2.5 million tonnes, up 12.47% from 2.2 million tonnes in 2006. The consumption per capita reached 4.18 pounds per capita last year, which is a dramatic increase from 0.42 pounds per capita in 1974.
India’s Base Metals Consumption
The Indian government has increased focus on infrastructure in recent years. The government’s rural electrification plan and the urbanization of semi-developed cities have rapidly increased demand for metals. This is in addition to heavy investment in construction of high-rise buildings, heavy machinery and bridges.
The Indian aluminium industry is one of the leading industries in the Indian economy, according to the report. The growth rate of aluminium production was 10.68% in 2007. Aluminium consumption per capita rose to 1.99 pounds per person in 2007, a significant increase from 0.46 pounds per person in 1974.
In 2007, India’s copper consumption increased by 8.58%, which is above the world average of 5.12%. The consumption per capita climbed to 0.86 pound per capita in 2007, a huge increase from 0.17 pounds per capita in 1974.
India’s nickel consumption rose from 2,800 tonnes in 1974 to 16,600 tonnes in 2007. Nearly 67% of nickel output was used to make stainless steel in India. The domestic consumption for zinc was 425,454 tonnes in 2007, an increase of 6.83% from 398,347 tonnes in 2006. India’s lead consumption rose 6.48% in 2007.
Source: World Bureau of Metal Statistics
Metal Prices
The spot aluminium price was last down 0.6 cent at $1.38 per pound, but has risen 24% so far this year. Aluminium closed out 2007 about 18% lower.
Copper was last down 6 cents at $3.95, up 32% so far in 2008. Last year, copper finished about 6% higher after a topsy-turvy year.
Nickel is currently trading down 15 cents at $13.00, even for the year, but down from highs above $15 hit in early March. Last year, nickel prices lost 25%.
Lead was last down 3 cents at $1.29, up about 8% since the start of the year after touching highs above $1.60 in mid-January. Lead ended 2007 about 43% higher, leading the other base metals.
The current zinc price is $1.0439, down 2 cents for the day. Zinc has come under pressure so far this year, down about 7%, after finishing 2007 down 47%, making it the worst performing metal of the year.
“It’s a tough call, but if things slow somewhat in China after the Olympics, the second half of 2008 could see flatter commodity prices,” concluded Murenbeeld. |
