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Metal industry expected to benefit from demand from China- Expert

In a bullish outlook for prices and production levels of metals such as iron ore, copper, platinum, gold and rare metals, the experts said the industry was expected to benefit from demand from China in particular and Asia in general the fastest-growing regions in the world.

Their views confirmed the centrality of China as an emerging economic powerhouse that is expected to lead the world economy out of the recent crippling downturn. The Asian giant was referred to in every presentation on the global outlook of various commodities as an important factor to the world economy.

Mr Kevin Norrish MD for research at Barclays Capital said "China's commodity demand has reached critical mass, with global demand for copper from China rising to 35% from last year from 15% in 2001. China is the most important factor in turning copper and commodity production."

He said that "We expect price increases to hit fresh highs by 2012, driven especially by insatiable demand from China as well as an expected rise in demand from members of the Organization for Economic Co-operation and Development."

He added that the copper sector was heading for a deficit in the next couple of years, with prices expected to reach highs of 8000 a ton.

Mr Magnus Ericsson chairman and president of Raw Metals Group said China was key to understanding the future of most metals, especially iron ore. He said though China was a major producer of metal, the past few years had shown a growing trend by China to import iron ore.

He added that this was largely because Chinese production of the metal was failing to cope with domestic demand. The dramatic fall in global prices in late 2008 had made imports more competitive for China.

Mr Ericsson said "Domestic Chinese production has been hard hit because of declining grade ores in the country, while imports have remained constant. China will not be able to find any new deposits, which means that it will have to look elsewhere to meet demand. Supply from domestic demand does not show an encouraging picture that it will meet future demand."

He said that "In 2010 we expect to see the world returning to economic activity, with Asian countries, particularly China and India, leading the way. The demand for steel is very much linked to the resumption of global economic growth in the longer term. The long-term future is definitely brighter."

Mr Ericsson expected the big three BHP Billiton, Rio Tinto and Vale to remain dominant in the iron-ore sector, even with further consolidation possible. This raised concern about concentration in the sector.

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