Increase in demand for ‘hard’ commodities, prices slowed but not ended – Davis

by Dave

Secular changes in demand occurred previously in the industrialisation of the US at the turn of the twentieth century, during the reconstruction of Europe after World War II and during the industrialisation of Japan in the 1960s and 1970s, he states.

“The difference with the current secular change is its sheer scale. We are dealing with the urbanisation and industrialisation of over one-third of the world’s population in China, but also in India, Brazil and other developing countries, especially in South-East Asia. In fact, over 400-million people are expected to move to urban centres over the next ten years. And, as countries industrialise, the intensity with which they use metals and energy increases,” Davis explains.

The ‘China effect’ ignited demand for commodities and boosted commodity markets a few years later. The impact of this effect could lead to a period of higher average commodity prices.

As a result of the lack of cap- acity, the mining industry could not provide new supply in response to the burgeoning demand from China, the impli- cations of which continue to reverberate today, he adds.

Increased demand from developing markets is depleting mines, while exploration for new significant mines has not been as successful in the last decade as in the one before.

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