China not a bubble, says analyst

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By: andrew lanham
Published: 13 Feb 04 - 0:00
Many people do not realise how much Africa has changed, and also how much China has changed, says Robert Friedland, cochairman and president of Ivanplats, speaking at the Investing in Mining Conference in Cape Town.

Friedland was one of four speakers who spoke on the rapid growth of Chinese demand for minerals, and its consequent impact on commodity prices.

China is now the largest consumer of platinum, zinc, copper, and iron-ore.

It is also the number-three user of nickel and the fourth-largest consumer of gold.

“China is on the largest shopping spree in world history,” he adds.

Many think that this phenomenon is a bubble; however, Friedland is confident that this is not the case.

China has become the dominant player in commodities and last year produced more steel than the United States and Japan combined, and was still an importer of steel.

Ninety per cent of China’s population are still rural workers, whereas, in the rest of the world, the situation is reversed.

However, urbanisation is growing rapidly, with China entering a 30-year development cycle the like of which the world has never seen, says Friedland.

The popularity of platinum jewellery has grown in China, and a Chinese girl would take it as an affront to be given a golden ring, he explained.

Jewellery demand favours platinum and has grown rapidly over the last five years.

The challenge for the platinum industry will be to provide sufficient of the metal to satisfy both the demand of the autocatalyst market and the Chinese jewellery market.

Friedland displayed figures showing the massive growth in demand for consumer goods such as personal computers and motorcycles.

This demand would drive the price of copper in the future.

“Base-metal prices have been down so long, people have forgotten what up looks like,” he adds.

Although platinum is much in demand, world instability, driven by America’s ‘1 000-year war with Islam’ will see Chinese demand for gold also rising.

In 2003, China imported more crude oil than Japan, and this is set to rise in line with the near-explosive demand in China for motor vehicles.

Friedland explained that it is cheap to produce goods in China, as the workforce is both well educated and prepared to work very hard.

The converse is that this workforce wants consumer goods.

It is predicted that more cars will be built in China by the year 2025, than in any country in the world.

The growth of hybrid electric/petrol cars will also see an increase in demand for nickel and copper.
Edited by: andrew lanham