014. China’s Demand for Raw Materials: current situation and future trends with Tim Clark

Welcome to “I LIKE TO MOVE IT,” the Rulmeca podcast that explores the latest trends and innovations in the material handling world.

I’m your host, Mr R, and in this episode, we will speak about the China’s Demand for Raw Materials. Today I am not alone, but with me there will be another co-host,  Mr Tim Clark. 

Mr R:”Previously we discussed your views of commodity cycles being divided into economic, developmental and technological. We discussed the current economic cycle in detail and you introduced us to China as a developmental super-cycle, please remind of of your thoughts on commodity cycles and developmental cycles”

Tim Clark: a quick reminder of the types of cycles. We have had several developmental cycles including the Industrial revolution in Britain, the emigration and industrialisation with a move West of the USA, Japan in the 1970s, the Asian tigers in the 1980/90s…. but nothing compares to China. After Deng Xiaoping opened Chinese markets and trade urbanisation and industrialisation exploded. This resulted in an unprecedented build of inventories of commodities (buildings, factories, roads etc) since the late 1990s. Growth rates are now normalising and China is exposed to normal cycles and rates, we think that the China super cycle is near

Mr R:‘There is clear evidence of imbalances emerging in the Chinese economy, what is the outlook

Tim Clark:Frankly this is the million $ question, many commentators like myself have felt that Chinese debt levels are high, real estate and infrastructure is maturing and demand is weakening and polulation has peaked. In truth China retains considerable flexilbity as there is limited outside debt, the economy is broadly closed for locals and hence the high savings rates are recycled through banks into investment. China has a centralisation policy but is pragmatic as events change, this was evidenced at the end of 2022 when Covid closure was released. The government retains massive ownership of state enterprises, land and other assets and this will allow a process of privatisation/wealth creation that could drive another step forward in China towards its goal of being a more balanced services/consumer/investment economy.

Mr R:‘ ‘which commodities are best exposed at present’

Tim Clark:China has the largest and strongest steel market in the world producing around 1bnt, 60% of the world’s steel. Steel is broadly used but is very much an infrastructure and real estate dominant commodity. We think that these areas of demand have peaked, are likely to plateau but ultimately to fall. We think that the recent investments into renewables and grid development are very interesting and we think that China will need growing quantities of base metals, copper in particular over the next few years. There is also a trend of income growth and this supports consumer durables demand and food demand, supporting base metals and fertilisers.

Mr R:‘: ‘Is there a new China on the horizon? Do you see urbanisation and industrialisation of other economies driving demand growth?’ – answer will highlight the current strength of Indian and potential from other South East Asian growth but off a low base and structurally at a lower and slower pace than China.

Mr R:‘‘Thanks Tim, what an interesting perspecitve on China as it enters the year of the dragon. It is incredible how the ecoonomic emergence has driven a real boom of commodity demand. Next time we will discuss the Energy Transition technological cycle’

Thanks again for listening; we’ll see you on “I LIKE TO MOVE IT“, the Rulmeca podcast next time.

Thank you for your attention, and I look forward to seeing you next time to explore the most interesting new trends and developments in the materials handling world.

Take care and keep being awesome.”

 

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