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ACEMAN, from UC Berkeley and the University of Paris/Sorbonne, by way of Ole Miss, splits time bouncing from Paris to Northern California and home to NOLA to rest his bones, eat some of the finest food in the world and watch the world go by at the Cafe du Monde with Walker Percy, and good ole'... More
  • Don't Back off of China Commodity Opportunities 0 comments
    Feb 5, 2010 12:00 AM

    The global economic crisis has changed the commodity landscape for China over the past 18 months. China remains as vital as ever to the short and medium term commodities outlook. China's development process still has a long way to run. The short term dips in commodity markets has provided China with opportunities. Shortages of key commodities which were bottlenecks in China's growth process have eased--Government is accelerating its infrastructure build up. Chinese government is buying commodities on the cheap for stockpiling. Chinese companies are buying overseas resource companies to ensure future supply sources.Chinese government is encouraging the restructuring of its own domestic industries by using cheap imports to close inefficient and small producers.

    China has dominated commodity growth: Alum: 36.7%, Copper: 39.6%, Zinc: 37.7%, Lead: 37.9%, Nickel: 43.2%, Crude Steel: 47.3%, Seaborne Iron ore: 75% (Macquarie Research, 2009).

    China's share of world commodity demand will continue apace due to:
    -Largest Urban Migration in world history,300 million people, which requires basic materials for infrastructure and construction.
    -Accelerating consumption by middle class in consumer durables, higher income spending driving auto, housing, travel leisure  & etc.
    -Entering a metal-intensive stage of development: China is still at the very low end of all basic materials intensity as it spends over $70 billion annually on transportation related infrastructure projects and energy demand continues to rise.
    --World's 4th largest economy adds the equivalent of the economy of Sweden to its GDP every year while average GDP growth near 10% annually as 1.3 billion people grows to 1.6 billion.
    --Massive commodity consumption from 2002 to present China accounted for most growth in global commodity consumption including 30% for crude oil as demand for commodities are a result of industrialization and foreign investments.
    --Urban floor space construction is key to China's commodity demand as it will construct approximately 2 billion square meters (new and rebuild), the equivalent to building Canada every year and 65% will come from residential real estate.

    And what does China need & want? Energy--coal & oil, Iron ore, base metals & steel. And while the rest of the world, mainly in the "West" is destocking, China is restocking. Don't bet against them!
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