The impact of slowed demand from China and growing demand in India for African commodities will be highlighted during a presentation at the 2016 Investing in African Mining Indaba by the Robert H Smith School of Business Michael Dingman chair in strategy and globalisation Dr Anil Gupta.
China and India play a major role in driving the global demand for commodities, and Gupta tells Mining Weekly that China’s demand has slowed down “extremely rapidly” and that, while India has picked up growth momentum, this growth is not yet able to compensate fully for the price drop, as a result of the slowdown in China.
In addition, the heavy capital investments of the past 15 years have significantly boosted supply, which has influenced African mining over the past two to three years.
It will take India about 15 years – roughly the time lag between the two countries – to reach the economic size of China today. However, India’s demand for commodities from 2015 to 2030 is likely to differ from that of China from 2000 to 2015, states Gupta.
He argues that, owing to climate change concerns, India’s gross domestic product will have to be a lot more energy efficient – especially in terms of fossil fuels – than has been the case for China.
As a result, India will be pushing hard for the implementation of solar, wind and nuclear energy generation over the next 10 to 20 years. Thus, India’s demand for oil and thermal coal could grow at a slower pace, despite continued growth, Gupta explains.
He further points out that India is one of the world’s top three iron-ore exporters. It also has one of the world’s largest reserves of thermal coal, which is, however, largely of relatively poorer quality.
Therefore, while India will need to keep importing oil and gas, it is less likely to become a major importer of iron-ore and thermal coal, says Gupta. He acknowledges a caveat in this prediction, owing to the regulatory barriers that, in recent years, have prevented Indian mining companies from extracting the needed iron-ore and thermal coal from domestic mines.
Meanwhile, under its 2014-elected Prime Minister Narendra Modi, the Indian government has been breaking down many of these barriers, but if these efforts do not materialise, India might also need to import growing volumes of these commodities, says Gupta.
He further predicts that India will become a growing importer of uranium and coking coal to cater for the country’s rapidly growing nuclear power sector, as well as its iron and steel sector.
Gupta adds that India is also likely to remain a major importer of phosphates and gold for its agriculture and jewellery sectors respectively.
Gupta is a professor of strategy, globalisation and entrepreneurship at the Robert H Smith School of Business at the University of Maryland, in the US. Since 2013, he has been ranked by UK-based Thinkers50 as one of the world’s 50 most influential management thinkers.