COMMODITY INVESTING
country’s rapid economic growth has created a China Effect for commodities. The country has gone from an irrelevant commodities player in the early 1990s to the ‘king of commodities’ – in less than 20 years. China has added 10,800 kilometers of railways, 300,000 kilometers of roads and 210 million kilowatts of installed power generation capacity over the past two years alone according to BCA Research. Despite economic growth that is expected to slow to 8.6% in 2012, UBS forecasts China will consume 72% of the world’s cement, 65% of the world’s iron ore, 45% of the world’s aluminum and 43% of the world’s steel in 2012. In order to meet increasing long-term demand
Figure 5: Number of Vehicles in China Growing Rapidly 80
60 40 20
for commodities, China has seen a staggering increase in overseas acquisitions. China’s overseas deals have grown from around $1 billion for only a handful of deals in 2000 to more than 300 deals worth almost $60 billion in 2011. China’s increased commodity demand is directly correlated
0 Source: China NBS
to the country’s amazing per capita GDP growth since Deng Xiaoping opened up the country’s economy in 1982. From 1980 to 2011, China’s GDP has increased 3,242% on a per capita basis – that’s roughly twice the growth of Canada, France, Germany, Japan, UK and the US combined over the same time period. After achieving such a lofty rate of growth, it’s hard to imagine that China still has a ways to go before per capita GDP increases cease to affect commodity demand. BCA Research says demand for many commodities has historically
peaked around $25,000 per capita GDP (on a PPP basis). China’s GDP per capita is forecasted to reach just over $9,000 in 2012 – which means the country is not even halfway there. One area where China’s rising wealth
levels have significantly changed the landscape is in the global automobile market, which McKinsey expects to reach 1.7 billion vehicles by 2030. China was catapulted to the top of the
The World’s Definitive Copper Conference 16-18 April 2012, Grand Hyatt, Santiago, Chile
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