Mineral opportunities still beckon as Asia’s transformation gathers pace – 06 May, 2014

Home / Views / Mineral opportunities still beckon as Asia’s transformation gathers pace – 06 May, 2014
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Talk of a slowdown in resource demand flies in the face of logic. All the evidence suggests increasing Asian demand will fuel global growth for some time yet.

For miners strong demand will continue.

For Australia, the opportunities are considerable. We not only have the potential to increase mineral exports (assuming we can remain competitive) but have further opportunity to participate in resource developments across Asia.

Our world class METS (mining equipment, technology and services) sector is particularly well placed.

As I said in an address to the Sydney Mining Club (Thursday May1):

– China’s demand will increase a great deal before it peaks. Per capita consumption of base metals is still only around half the level achieved by Japan and South Korea when they made a similar transition from rural to urban-consumerist society.  The same shortfall is evident in other indexes such as capital backing and ownership of consumer goods. China’s demand for copper could well double before it peaks.

– Urbanisation, one of the great drivers of Chinese steel demand, looks set to continue for years yet.  It is likely to get a new growth spurt from relaxation of the Hukou laws which previously limited migration from farm to city. This is likely to see a surge of housing and infrastructure in the so called second tier cities (which despite that title already have populations measured in millions). This will drive commodity demand for years yet.

But China’s narrative, though gripping, is only part of the story. Indonesia’s GDP has been growing at around six per cent a year since 2006. On present indications it will have a middle class of 140 million by 2020 and will be pushing into the world’s 10 biggest economies. That sort of growth requires big resource inputs.

Growth in India may still be uneven, but four states with a combined population of more than 300 million are growing at a China-like rate – between 8.4 and 12.6 per cent a year! That is a large and dynamic economic bloc by any standards.

In the face of those figures it is hard to see anything but increasing demand for resources in the coming years. The trend line has to be north-east. Yes there will be humps and bumps along the way, but the direction and force are clear.

Where will the output come from to meet this demand? Asia itself is prospective for much if it. There’s an arc sweeping through Central and North Asia, down through South-East Asia and into the Western Pacific nations that is highly prospective, particularly for copper/gold, that is relatively under-explored.

We can expect a great deal of mineral development in this region, much of it funded through Asian sharemarkets (where capitalisation has been growing rapidly).

So we have a resource base, capital and a large pool of labour in our region. The remaining requirements for rapid mineral development are technology and technical expertise. Happily, Australia can be a major provider of these.  We can be full partners in this great Asian adventure.

That was the gist of my message to the Sydney Mining Club. Forget any hand-wringing over the end of the so-called mining construction boom; there will be many more opportunities ahead — some at home, more on our doorstep.