We and others in our industry write often about the impact on metal prices and supply as a result of rising demand in the emerging markets and, in particular, China.
China has without doubt been the largest single driver of metal prices over the last ten years as the country’s phenomenal growth, much of it investment-led, has sucked in mind-boggling quantities of iron ore, coal, base metals and other commodities.
At the same time, the wealth created by that growth has gradually permeated through Chinese society, resulting in a rising middle class keen and able to buy foreign-made products.
The investment in infrastructure has been the single-largest factor within China’s growth story when it comes to metals demand. China’s construction sector has spanned public works like airports, highways, seaports, railways, public buildings, bridges and so on, in addition to a massive residential and commercial construction sector which has added hundreds of millions of square feet of apartments and office blocks – all of which have consumed steel and base metals.
This activity has in turn spurred the development of the world’s largest steelmaking and smelting industries for copper, aluminum, lead, zinc and other metals. The supply chain has responded dynamically with the growth of manufacturing to supply the equipment to enable these undertakings to happen.
So much is well known and nothing new, but as China forces a dramatic realignment in its economy from being export-led to domestic consumption-led — a change that historically has taken decades in other economies but, as in many things Chinese, is happening in a few short years in China — the rest of the world is finding the playing field changing rapidly before their very eyes.
Continued in Part Two.