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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (37915)	9/6/2003 7:58:01 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

China gobbling materials China looks set to lead a decade-long bull market By Stephen Wyatt in Singapore Published: September 5 2003 7:30 \| Last Updated: September 5 2003 7:30 Commodities are all the rage these days. They are, after all, the raw materials fuelling China’s growth. China’s ballooning demand for basic commodities has firmly placed it as the global price setter. Analysts claim that the amount of raw materials needed to fuel its GDP growth, currently exceeding 7 per cent a year, means that China may single-handedly pull the global commodities market out of a deep rut. In a recent report, Deutsche Bank analysts wrote that China’s import demand was unlikely to fall in the foreseeable future, given a range of geological constraints, inefficient mining operations and the phenomenal growth of its industrial production. China has already made its mark in the commodities market. Last year, the country was responsible for 28 per cent of the world’s iron ore consumption, 21 per cent of its crude steel consumption and 20 per cent of its alumina consumption. In fact, it has been a major buyer of most commodities. For some materials in particular, such as nickel, stainless steel, crude steel, iron ore and coking coal, China’s import and domestic processing levels have been outstripped by the heady growth in demand. The result had been a rise in global prices, said Deutsche Bank's analysts. Nickel prices have doubled over the past two years, hitting its highest level for three years this week. Spot alumina prices have doubled this year from around US$140 per tonne to US$300 per tonne. Julian Garran and John Bird, two ABN Amro analysts in London, agreed that prices could only rise further. “We believe that the 20-year bear market in commodities is at an end, and our bet is that a 10-year bull market is beginning,” they said. They pointed to China’s heavy reliance on basic commodities. Apparently, every dollar of GDP growth in China consumes around three times the amount of commodities that fuel the same growth in the US. Economic expansion in China remains largely focused on infrastructural development and the production of basic consumer goods, which are raw material-intensive. Developed economies tend to be service-oriented. But not all commodities have seen their prices soar because of China. While its import demand for alumina, lead and zinc concentrates has soared, so too has China's export of their refined derivatives. The country has relatively advanced processing facilities for those metals but their global (including China's) demand continues to fall. China’s surging export of thermal coal, which more than doubled over the past five years, has also crushed international prices. Jim Rogers, co-founder of the Quantum Fund with George Soros, may have the most straightforward advice. He wrote in the book, “Adventure Capitalist”, that the “twenty-first century will be the century of China. The best way to play China is to buy things that the Chinese need and will buy.” And those things, he said, were commodities.