The euro-zone crisis is slowing global economic growth for the short term but China, the world's largest consumer of many commodities, is still expected to grow at more than 8% this year, mining titan Rio Tinto PLC (RIO) said in a presentation Friday.
Commodity prices have dropped recently as the European sovereign debt crisis has dented the region's economy and resulted in lower commodities consumption, while Chinese commodities demand has ebbed following the Asian giant's monetary policy tightening.
But China, the world's second largest economy after the U.S, is still expected to grow at a fast clip over the next decade or so and remain a key contributor to commodities consumption growth alongside other emerging economies such as India, Rio said.
The "euro-zone crisis continues to escalate, despite attempts to patch surfacing risks. [It is] expected to be deeper and longer than previously assumed," said Vivek Tulpule, Rio Tinto's chief economist.
Global Insight expects global gross domestic product to grow 3.3% in 2012 and then 3.6% in 2013 after an estimated 3.7% in 2011, according to figures provided by the Anglo-Australian miner in its presentation.
The GDP of the 17 countries that use the euro is forecast to shrink 0.4% in 2012 after growing 1.5% in 2011, Rio said, citing Global Insight.
Chinese GDP growth is also expected to slow from an estimated 9.3% in 2011 but will continue to grow at a fast clip of more than 8% in 2012 despite lower export demand and monetary policy tightening, Mr. Tulpule said.
He expects the Chinese economy to continue expanding at a rate of 8%-9% up to 2015 and then at 7%-8% between 2015 and 2020, resulting in a doubling in the Chinese economy by 2020.
Chinese economic growth in the second half of the decade will slow in part due to slower productivity growth but will continue to rise due to a higher contribution from services and also the urbanization of China's non-coastal provinces.
"Chinese steel growth still has a long way to run," said Mr. Tulpule. "Many large Chinese provinces are just beginning to climb the steel intensity curve."
While China's Shanghai provincial urban population of 23 million consumed steel at a rate of 1,800 kilograms per person in 2011, China's Sichuan provincial urban population of 35 million consumed less than 400 kg of steel a person.
This doesn't include the rural population, many of whom are expected to migrate to cities over the next several years.
Rio Tinto estimates that more than 330 million Chinese live in cities that consume less than 600 kg of steel per person. Beyond 2020, China's economy will grow at 5%-6% as China's population and economy matures, Mr. Tulpule noted.
Aside from steel and iron ore, a key steel making ingredient, Mr. Tulpule highlighted three key commodities where the long-term fundamentals look strong.
In copper, constrained supplies and higher operating costs will support prices, while the thermal coal market remains well-supplied in the short-term but demand is set to continue growing, buoyed by robust Indian imports and strong Chinese demand.
Bauxite, a key ingredient used to make aluminum, is also forecast to see strong demand due to rising Chinese import needs, Mr. Tulpule said.
foxbusiness.com
Commodity prices have dropped recently as the European sovereign debt crisis has dented the region's economy and resulted in lower commodities consumption, while Chinese commodities demand has ebbed following the Asian giant's monetary policy tightening.
But China, the world's second largest economy after the U.S, is still expected to grow at a fast clip over the next decade or so and remain a key contributor to commodities consumption growth alongside other emerging economies such as India, Rio said.
The "euro-zone crisis continues to escalate, despite attempts to patch surfacing risks. [It is] expected to be deeper and longer than previously assumed," said Vivek Tulpule, Rio Tinto's chief economist.
Global Insight expects global gross domestic product to grow 3.3% in 2012 and then 3.6% in 2013 after an estimated 3.7% in 2011, according to figures provided by the Anglo-Australian miner in its presentation.
The GDP of the 17 countries that use the euro is forecast to shrink 0.4% in 2012 after growing 1.5% in 2011, Rio said, citing Global Insight.
Chinese GDP growth is also expected to slow from an estimated 9.3% in 2011 but will continue to grow at a fast clip of more than 8% in 2012 despite lower export demand and monetary policy tightening, Mr. Tulpule said.
He expects the Chinese economy to continue expanding at a rate of 8%-9% up to 2015 and then at 7%-8% between 2015 and 2020, resulting in a doubling in the Chinese economy by 2020.
Chinese economic growth in the second half of the decade will slow in part due to slower productivity growth but will continue to rise due to a higher contribution from services and also the urbanization of China's non-coastal provinces.
"Chinese steel growth still has a long way to run," said Mr. Tulpule. "Many large Chinese provinces are just beginning to climb the steel intensity curve."
While China's Shanghai provincial urban population of 23 million consumed steel at a rate of 1,800 kilograms per person in 2011, China's Sichuan provincial urban population of 35 million consumed less than 400 kg of steel a person.
This doesn't include the rural population, many of whom are expected to migrate to cities over the next several years.
Rio Tinto estimates that more than 330 million Chinese live in cities that consume less than 600 kg of steel per person. Beyond 2020, China's economy will grow at 5%-6% as China's population and economy matures, Mr. Tulpule noted.
Aside from steel and iron ore, a key steel making ingredient, Mr. Tulpule highlighted three key commodities where the long-term fundamentals look strong.
In copper, constrained supplies and higher operating costs will support prices, while the thermal coal market remains well-supplied in the short-term but demand is set to continue growing, buoyed by robust Indian imports and strong Chinese demand.
Bauxite, a key ingredient used to make aluminum, is also forecast to see strong demand due to rising Chinese import needs, Mr. Tulpule said.
foxbusiness.com
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