China, the world's second largest economy and its number one energy consumer, is shaking up global commodities markets where its potent growth momentum is also powering a rise in metals prices.
"China is now the largest energy consumer by our definition," Nobuo Tanaka, head of the International Energy Agency, said recently.
"Probably half of the oil demand increase comes from China. China's consumption is growing, growing, but we don't know how long China will continue to grow."
China, which relies on coal to meet 70 percent of its energy needs, is nonetheless the world's second largest oil consumer behind the United States.
"The center of gravity (in the energy market) is shifting from the Middle East to Asia," Mikkal Herberg of the National Bureau of Asian Research said earlier this month.
China has stepped up an investment drive to assure itself of a steady supply of oil from Iraq to Latin America where the leading Chinese refiner Sinopec in early October acquired a 40 percent stake in Spanish energy company Repsol. "There is in China a big supply concern of ensuring what they need - energy and food but also metals," noted Philippa Malmgren of the Canonbury Group.
Given the depth of its demand, China is fuelling a rise in base metals prices that according to some analysts could be maintained for the next several years. Malmgren said China was now engaged in the construction of new airports, railways and new cities, activities that are "very metal intensive."
"We have structural demand there which is not going to decrease."
Daniel Brebner of Deutsche Bank predicted that China's copper requirements "could double over the next decade."
But other economists urge caution, citing China's dependence on Western economies and the determi-nation of Chinese authorities to avert economic overheating.
"Although China is now the single most important consumer of industrial metals, ... the next three places are typically filled by the United States, Japan and Germany," said John Higgins of Capital Economics.
"These developed economies face a long period of sluggish growth. Nor is China immune to what happens in the West, especially if the US lurches toward protectionism. And there are plenty of downside risks to China itself.
"At the very least, economic growth is likely to be slower and less commodity intensive over the next several years." |
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