Rising car sales and higher spending on infrastructure projects fuel demand.
Metals demand in India, Asia’s second-fastest growing major economy, may double in five years and remain robust for a decade, fueled by rising car sales and higher spending on infrastructure projects, analysts said.
Growth in demand for base metals may jump 10-15 per cent this year, said Sumit Verma, an analyst at broker Geojit Comtrade Ltd. That compares with an average annual increase of 6 per cent for aluminum and copper, and 4.3 per cent for zinc between 1972 and 2009, Barclays Capital said in November, predicting demand to jump 80 per cent by 2015.
“Steel demand may double in the next five years and I will not be surprised if demand for non-ferrous metals such as copper and aluminum grow at twice the pace,” said Kunal Shah, head of commodity research with Nirmal Bang Securities Pvt in Mumbai.
Prime Minister Manmohan Singh has proposed $1 trillion of spending in the five years through 2017 to upgrade the nation’s road, railway and power networks, which the finance ministry says shaves 2 percentage points from growth. Commodity demand in India has reached a “tipping point” and the nation may surpass the US as the second-largest consumer of copper, aluminum and zinc in the early 2020’s, Barclays said.
“The drivers will be growth and development of key sectors of the economy like infrastructure, power, construction, energy and transportation,” Geojit’s Verma said in an e-mailed reply to questions. “The outlook for next five to 10 years is bullish.”
India’s economy will probably grow 8.6 per cent in the year to March, the most in three years, the government’s statistics office said on February 7. The nation expanded at 8.9 per cent in the quarter ended September 30, compared with the 9.8 per cent growth in the three months ended December 31 in China, the largest consumer of everything from copper to zinc and iron ore.
Record sales
Rising salaries and economic expansion pushed car sales in India to a record last month. Deliveries climbed 26 per cent to 184,332 vehicles in January, the 24th consecutive monthly year- on-year increase, according to figures released by the Society of Indian Automobile Manufacturers on February 9.
Aluminum demand in India may climb an average 8 per cent a year between 2009 and 2030, Barclays said, predicting growth in copper and zinc usage at 8.6 per cent and 8.5 per cent each. In absolute terms, the country’s aluminum demand growth from 2009 and 2015 will be equal to Korea’s current consumption or twice Canada’s, the report said.
Hindalco Industries Ltd., India’s largest aluminum maker, on February 12 reported a 7.7 per cent gain in third-quarter profit because of higher base metal prices and said global demand for the metal is expected to be “robust” for the rest of the year. Sterlite Industries Ltd., the nation’s top copper producer, last month reported a 60 per cent jump in earnings.
China spending
Commodities beat gains in stocks, bonds and the dollar in 2010 as China led the recovery from the first global recession since World War II. The rally in raw materials may be extended this year as the global economy recovers and infrastructure spending in China boosts demand for copper and other base metals, Jing Ulrich, chairwoman of China equities and commodities at JP Morgan Chase & Co. said yesterday in Singapore. Copper on the London Metal Exchange reached a record $10,190 a tonne yesterday, boosted by manufacturing growth in China and the US, the top two users.
“We are holding bullish for base metals prices,” said Sundeep Jain, an analyst at Karvy Comtrade Ltd. “Demand on the one side is robust from emerging markets, be it India or China, and on the other, supply is not able to catch up with demand.”
