‘India to account for large share of global commodity demand by 2029’
India will account for a significantly larger share of world commodity demand by 2029, though Chinese demand will likely continue to shape commodity markets over the next 5 years, the Australian Office of the Chief Economist (AOCE) has said.
“... Indian economic growth is currently the strongest in the world, and its growing manufacturing base, strong infrastructure spending and demographics, all suggest rising per capita consumption of resource and energy commodities,” it said in ‘Resources and Energy Quarterly’ released on Thursday.
In China, strong investment in infrastructure and manufacturing capacity has helped resource and energy commodity demand in the face of weak demand from the residential property sector, the AOCE said.
SOFT GLOBAL GROWTH
“World economic growth remains soft, weighed down by relatively tight financial conditions. However, key markets have continued to support commodity demand. US economic growth has been robust despite interest rate hikes in the past 2 years,” the quarterly said. Global energy transition will be a key factor in resource and energy commodities over the outlook period to 2029.
“While the transition will see increased demand for commodities used in low emission technologies (for example, iron ore, aluminium, copper, nickel and lithium), it will reduce demand for other commodities (such as some fossil fuels),” it said.
The continuing evolution of technologies during the energy transition increases the challenge of forecasting future demand, supply and prices. “The decarbonisation of steel/aluminium production and supply chains will affect growth and trade patterns over the outlook period to 2029,” the AOCE said.
NICKEL, LITHIUM
Overcoming the substantial technological, energy and feedstock challenges required to achieve this transformation will take both time and substantial capital investment. There are already many pilot steel plants under construction around the world, especially hydrogenbased DRI operations, most of which are expected to begin over the next two years, it said.
Aluminium producers are increasingly resorting to renewable power to reduce their emissions, and this trend will accelerate over the outlook period. “This will include the use of green hydrogen,” the ‘Resources and Energy Quarterly’ (REQ) said.
The AOCE said a relatively weak price outlook has contributed to announced closures and production cuts by a number of key nickel and lithium producing nations (including Australia). It has added to existing supply chain uncertainties associated with Western nations’ policy measures to secure future supply.
Prices of lithium and nickel reached high levels in 2022 and H1 2023. “Combined with strong supply growth since 2020, softerthanexpected (cyclical and structural) demand for both metals has since seen market surpluses develop. Since the last REQ, rising inventories have seen the prices of lithium and nickel hit 5year lows,” it said.