Nomura: We have performed a detailed analysis of metal intensity of GDP for steel, copper and aluminium in the following pages, which we believe clearly outlines our view that China’s economy is not large enough (in GDP terms) to support a continuation of the rapid growth in metal consumption seen in 2000-11.
Our conclusions are based on an analysis of China’s metal intensity of GDP rather than metal consumption per capita, and reflect a simple premise that while a country’s population size may be an important indicator of a country’s potential demand for industrial metals (per capita), the ability to meet potential demand is determined by the quantity of metal consumed in relation to the size of economic output (ie, GDP, not GDP per capita). Hence, in our view, metal intensity of GDP is a more important variable to monitor than per capita metal consumption.
Zarathustra: The reason is that, according to Nomura, the per-capita analysis ignores the composition of China’s GDP growth. China’s investment driven growth is very metal intensive.
via The China-driven commodities super-cycle debate: Nomura edition.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
