Are China and India Weakening The Global Supply Chain For Metal Products?

These two exploding economies have been quietly grabbing valuable
global sources of copper and steel products to fuel their rapid growth
and leaving uncertainty for the future of metals availability and prices.

With a combined population of 2.5 billion people, China and India are becoming formidable consumers of the world's resources. Since the 1990's, both countries have experienced unprecedented growth and they have been gobbling up supplies of raw materials to support the needs of their citizens and the building of their infrastructure.

With an abundance of capital available, both China and India are buying oil, steel, mining operations, and other raw materials to feed their bustling economies. They are now competing on a much grander scale for global supplies from copper mines to steel mills, along with most other raw materials, than ever before.

As China's and India's educated and affluent citizenry continues to grow, so will their needs and wants and both governments will have to make available the commodities that will support those needs and wants. In doing so, both countries are buying for today and for anticipated growth in the future. Visit either country and the sea of cranes, construction sites, and smokestacks can be seen everywhere.

China has been aggressive in securing reliable sources for copper and other metals, along with India, and this is may likely cause greater demand that will begin to outstrip supply. As we all know, this drives up prices while at the same time thinning availability of crucial materials. We have to wonder how this will affect world markets. How long can these countries sustain their growth and, hence, their demand for copper, aluminum, and steel?

Recent news stories and commentary claim that both China and India are already experiencing a slowdown in economic growth and that their demands on world resources will subside and reach a normal equilibrium in the marketplace over the next couple of years. And the price of copper and related metals have eased up. While it is true that both countries' economic growth has slowed and metals prices have come down, we should not be led into a false sense of security. The drop in growth is minimal and both countries have huge populations that make economic indicators deceiving when you look at the actual impact. The shear size of the citizenship clearly indicates that demand will keep climbing. Maybe not at the 14% that had been the norm for China and 9% for India, but their current growth is only a few percentage points less and that does not translate into a worrisome slowdown. That's still a lot of growth and a lot of demand.

When one analyzes the current slowing growth of both nations, it seems more like a cyclical phenomenon than a sustaining one. Factors such as domestic inflation, severe weather, devastating earthquakes, and the weakening global economy in the first half of this year have pushed the economies of both countries closer to decline, but far from crashing. Indexes for the most recent quarter show signs of an upward swing already. China and India are still in developing, growing economic cycles that historically last for a ten year period or so, which means that both could remain strong for quite sometime.

It is hard to tell how long India and China will continue to import raw materials at current and recent levels, but one thing is for sure, their populations are growing rapidly, their people are getting more educated and restless, and their demand for copper, steel, and oil will impact the price and availability of these commodities down to the local machine shop. We need to prepare and to adjust to ensure that we are able to get the copper, steel, aluminum, and oil that we need to support our manufacturing base right here in the United States.

Till Next Time,
Bernie Rosellen
Metal Matters

About the Author:
Bernie Rosellen has been involved in metals manufacturing and distribution for thirty years. He has owned his own manufacturing company and is currently an executive with a supply chain management company and writes articles called Metal Matters at www.MetallynxUSA.com