Manila: An “industrial revolution” in the developing world has created a “super cycle” of unprecedented global metals demand that could sustain the industry for up to 18 more years, an Australian industry expert said on Tuesday.
The upside is huge because although developing economies now account for half the world economy and two-thirds of world economic growth, their per capita steel and copper use is only a fraction of those of the developed world, said Mitchell Hooke, chief executive of the Minerals Council of Australia.
“Half the world is going through an industrial revolution compared to the United States in the 1890s and Japan in the post-World War II period,” Hooke told an Asia-Pacific mining conference in Manila.
“As incomes rise up goes the demand for industrial commodities,” he said.
This has created global demand for metals products “like nothing” the world has seen before in the past century, Hooke added.
The phenomenon, he said, has been coupled with the “re-industrialization” of the developed world, particularly Japan, that is creating more demand.
With the engine of global growth shifting from the so-called Organization for Economic Cooperation and Development (OECD) countries to the Bric countries of Brazil, Russia, India and China, “increased demand will continue to swamp supply” despite a wave of fresh mining investments, Hooke said.
And unlike before, China is “becoming more and more like the US economy, withlittle reliance on export sales” and with growth driven more and more by domestic demand.
“We’re just two years into a super cycle of globalized demand,” Hooke said. “The underlying fundamentals of demand are locked in.”
The upturn, which over the past year has seen prices of copper and nickel touch record highs, should be sustained at least over a decade and could even extend to “15-20 years,” he said.
Despite increased production, he said increased supply was still struggling to meet demand.
The speed of delivering increased supplies, as well as the additional costs of producing these supplies, would be “the determining factor as to how prices will moderate.”
Hooke said the mining community’s response of “a sudden rush of investment” to meet the surge in global demand has led to inflation, jacking up the cost of mining supplies, equipment and wages.
How economies respond to these policy issues “will determine which country will be competitive,” he added.