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An interesting set of data from Chris Nelder via Business Insider:

Highlights

China:

  • Is the #1, #2 or #3 producer in the world for 15 of the most important commodities;
  • Is the #1 importer of copper, accounting for more than 40% of world demand;
  • Is both the #1 producer in the world of iron ore and the top importer;
  • Is the #1 car manufacturer in the world, and the #1 car market. (China is now second only to the U.S. in first-class interstate highways.)
  • Consumes half of all the cement in the world. In 2005 it built 70,000 new supermarkets. In the US, as of the 2002 census there were 150,000 “food and beverage stores”.

Oil & Gas Demand

Steven Kopits, the managing director of Douglas-Westwood LLC, said China will overtake the U.S. as the world’s top consumer of oil by 2018.

China’s gas consumption is expected to rise from 7.6 billion cubic feet per day (Bcfd) in 2008 to over 30 Bcfd by 2030. China is already building pipelines from Turkmenistan (+ Azerbaijan?), East Siberia, Sakhalin, Myanmar, and LNG routes to import gas.

China’s demand for coal is just as astonishing: In just the last four years, Kopits observed, its increase in demand for coal was equivalent to the total U.S. coal demand.

Adam Robinson, a Vice President at RBS Sempra Commodities has suggested that China is willing to buy oil in size at $55 a barrel for its strategic stocks, providing a natural floor for global prices.

Tom Petrie, Vice Chairman of Bank of America Merrill Lynch predicts that all of the growth in global oil demand through 2030 comes from non-OECD countries, with China accounting for fully 43%.

The IEA anticipates that absolute oil consumption in the OECD will fall over next 20 years by about 3 mbpd, while China’s increases by 9 mbpd, from approximately 4mbpd today.

Chinese Oil Demand

Chinese Oil Production

Chinese Oil and Gas Production

The Asian region started producing more than it was discovering in the early 1980s (globally this occurred in the 1960s). The region’s production vs exploration deficit is about 1.5-2 billion barrels per year.

Michael Rodgers of PFC Energy asserts that China’s domestic oil production has nearly peaked.

China currently accounts for about half the total oil production of South Asia, Southeast Asia, and Australia combined. However, its own producing fields are now in decline with aggregate depletion levels of 60%. Fields producing prior to 2000 are generally declining at rates of 5-7% per year, but some mature fields are declining by as much as 16-20%. China expects enhanced oil recovery (EOR) technology to bring the overall decline rate to 6.7%.

Through enhanced recovery strategies China should be able to maintain a domestic production plateau around 3.6-4 mbpd for another 8-10 years in the PFC forecast. But then, without significant new fields, China will see a “catastrophic” drop in production as mature fields, accounting for 3 mbpd of production now, fall to about 1 mbpd by 2020.

Combine these demand and production forecasts and you have ample reason to support China’s clear strategy of acquiring resources, anywhere, at any price.

That voracious demand drove up prices across the board. Since 2003:

  • Copper is up 307%
  • Scrap iron is up 559%
  • Molybdenum is up 997%. Exports from the U.S. doubled, most of which went to China.
  • The average price increase of major metals was 379%, and the average price increase was 746% for 15 other industrial metals.

The question is, is this demand sustainable?

http://www.businessinsider.com/china-the-vampire-squid-of-commodities-2009-11

China currently stores ~4,500,000 tonnes of aluminium in warehouses throughout the country. For  scale – this is enough for approximately  69,000 747 jets & Boeing has built less than 1500 of them since the model was introduced in 1970.  Alcoa expected global demand for aluminium to be 34.5 million tonnes in 2009 (http://www.forbes.com/feeds/afx/2009/04/07/afx6267466.html ; http://www.smh.com.au/business/aluminium-bubbles-away-as-surplus-grows-20091123-iunv.html).

China will make 18 per cent more metal next year, leading an 8.9 per cent global expansion and contributing to a surplus equal to more than three months of North American demand, Barclays Capital estimates. Global output increased more than 12 percent since April, International Aluminium Institute data show. Not only that, but new smelters are coming on line. In April 2010 Emirates Aluminium will start the world’s biggest smelter, covering more than 2 square miles and with a peak production output of 1.4 million tonnes a year, in Abu Dhabi, and a plant part-owned by Norsk Hydro ASA in Qatar fires up next month with a planned capacity of 585,000 tonnes. Last year’s global output was 38.8 million tonnes, up 67 per cent on 1999, the aluminium institute’s data show. China is due to add 1 million tonnes of capacity in 2010.

Build it and they will come?

Aluminium closed at $US2060 a tonne on November 20th.

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