Jesse Riseborough London
CHINA, the world’s biggest commodities consumer, ignited a $1 trillion (R11.48 trillion) spending spree since 2002 by mining companies worldwide as they rushed to supply its booming industrial and construction markets.
Now, with real estate development slowing, the global industry’s biggest question mark just got bigger. As thousands of company executives, investors and bankers head to South Africa this week for one of the world’s largest mining conferences, bear markets in iron ore, coal and copper resulting from China’s slowdown will dominate discussions.
“Chinese real estate investment, the single most important commodity demand driver for the past 15 years, is now falling year on year,” said Richard Knights and Ben Davis, analysts at Liberum Capital in London, in a February 2 report.
The problems are “real”, they wrote, “and we think underappreciated by the market”.
Grim warning
The annual Investing in African Mining Indaba convention is the biggest such gathering on the continent.
It will draw executives from companies ranging from London-based Rio Tinto Group, the world’s second-biggest miner, and Russia-based Rusal, the largest aluminum producer.
Some see grim warning signs that China’s slowing economy will hinder demand growth for products such as iron ore. Others are optimistic that new government policies in China may spur purchases of consumer goods containing aluminum and copper, compensating for shifts away from industrial customers.
Commodity producers were “still seeing the benefits of a secular upturn” as Chinese consumers moved up to “higher levels of consumption”, said Tom Albanese, the chief executive at India-focused mining group Vedanta Resources, in an interview last week.
If, however, China’s policymakers got it wrong, “and you get a hard landing followed by social disruption, history shows that China can look very bad”, he said.
Data released this past weekend reinforced concerns about China’s economy. –
Bloomberg