china: demand to grow at double-digit rates to 201

  1. 22,691 Posts.

    China demand for commodities to grow at double-digit rates to 2010
    Last Updated(Beijing Time):2005-03-25 11:00

    China's consumption of steel, iron ore, nickel, copper, aluminum and oil will grow at double-digit annual rates for the next five years, CLSA said in a report.

    Its report on commodity outlooks concludes that while growth in China's hunger for resources has passed its peak, the country will continue to drive global demand growth for almost all commodities.

    "For investors concerned with commodity prices over the coming five years, the focus should be on how much supply will be coming on line and not the sustainability of Chinese demand," the report said.

    It said that domestic demand, rather than foreign investment, is driving the commodity boom, making China less susceptible to downturns in other markets and less of a threat to other economies.

    The strength of this demand for resources underpins CLSA's forecast of 8-9 pct GDP growth for the Chinese economy this year and 7-9 pct annual growth through 2010, the report said.

    CLSA said the main threats to these forecasts are the high proportion of fixed asset investments in China that are government funded, plus the continued dependence on the banking system for almost all financial intermediation in China.

    On oil, the report notes that the International Energy Association estimated in the late 1990s that China would need 7.1 mbd of oil in 2010, "but it now looks like demand will hit that mark this year."

    "Consumption has far outpaced domestic oil production, leaving China with a rapidly growing appetite for imported oil," the report said.

    On aluminum, China is likely to overtake US as top consumer of the commodity within two years.

    Demand for copper will also continue to grow at annual rates of 10 pct or above, feeding China's growing power network and construction boom.

    The report said China also has room for substantial increase in demand for steel, with per capita consumption rates still at relatively low levels.

    Liquefied natural gas is the only commodity where China was not driving demand, but that is about to change "in a big way", it predicted.

    It cited industry sources in Australia as saying China could import 40 to 60 metric tons per year of liquefied natural gas by 2020. About half the demand is coming from power plants.

    "When it comes to energy and commodities, China already punches above its weight-class," the report said.

    That hunger for resources is likely to translate into more overseas acquisitions by Chinese companies in the mining sector, it said, noting such investment is still in its early stages. (AFX)

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.