The super cycle driven by China may be over, but India has it’s own super cycle-lite going on if recent reports are anything to go by.
It’s true that India – hampered as it is by appalling infrastructure, stifling bureaucracy and a gradually improving but still pervasive corruption – is not of the scale or dynamism of China. Still, with a population of over a billion people, one of the highest birth rates in the world, the benefits of a decent education system, wide access to English, a good legal system and an entrepreneurial culture India has, against the odds, generated levels of growth that have been beyond the reach of some other developing countries.
India’s urbanization is still WAY behind China’s, but it is growing 15% faster. China’s population is projected to grow around 0.3% annually between 2010 and 2030. India’s population is expected to grow 1% a year. That may not look like a big difference, but when you compound those numbers it becomes huge.
Strong Steel Demand
Iron ore producers are predicting seaborne iron ore demand to increase by some 35% between 2012 and 2020 and domestic Indian steel makers, in spite of repeated disappointments applying for new production permits and approvals, seem to agree with them. In a recent auction of three coking coal blocks in India, the government received 36 applications. Compare that to the US government’s recent tender for Powder River Basin, for which they received no bids.
India’s decision to ban iron ore exports was more of a legal action than a political one, aimed as it was at clamping down on the corruption of local officials and significant illegal mining activity. It was backed and lobbied for by steel producers worried that in a country where development of new mines was becoming increasingly impossible due to environmental activist action, the country’s permitted mines could run down as steel makers’ demands rose, forcing domestic steel producers to pay ever higher prices for one of the few commodities of which India does have sizeable reserves, iron ore.
The Massive Momentum of Numbers
Those demographics have a relentless momentum to them. As the population rises and urbanization increases, demand for steel and a whole range of metals will inevitably rise. Even if the next administration makes a complete ham fist of running the country, growth will continue. If the winning coalition fulfills the promise that many Indians hope, India could be in for a period of significantly improved GDP growth and, with it, rising levels of metal consuming investment. Let’s hope India’s electorate chooses wisely.