India demand for commodities could make up for China shortfall: ANZ

Rashtrapati Bhavan, the official residence of the President of India, in New Delhi.

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China’s growth slowdown is set to hurt global commodity demand, but India could make up for some of that shortfall, according to ANZ.

India’s economic growth is likely to outpace China’s, with the South Asian nation set to become the third-largest economy by the end of this decade, the bank predicted.

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That means India’s demand for commodities will likely surge, and it could cover more than half of China’s demand shortfall especially in the energy sector, the bank said in a recent report.

“India’s demand for commodities is slated to grow rapidly, supported by favorable demographics, urbanization, the expansion of manufacturing and exports and the build-up of infrastructure,” ANZ analysts wrote. 

India has overtaken China to become the most populous country, and according to ANZ’s data, its rate of urbanization is expected to rise to 40% by 2030 from current levels of 35% — stoking demand for industrial metals and energy commodities which are often associated with a rise in demand for infrastructure and manufacturing.

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India’s annual demand for major commodities — like oil, coal, gas, copper, aluminum and steel — is expected to rise collectively by more than 5% from now till 2030, the bank estimated. 

In comparison, China’s demand for these same commodities will slow to between 1% to 3%, accompanying a projected GDP slowdown to 3.5% growth by the end of this decade. China’s second-quarter GDP expanded 6.3% year-on-year, falling below market expectations for 7.3% growth.

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The Indian government’s increasing emphasis on infrastructure development, energy transition and capex could also mean demand for steel and iron will pick up for the country.

“Metals and bulks may see a strong rise in demand,” the report said.

ANZ said the immense shortfall left by China for steel and aluminum demand may be tougher to fill.

“For aluminum and steel, India’s pick-up of demand left unrealized in China may not be very substantial, simply because the scale of consumption of these items in the latter is very large,” ANZ highlighted.

China consumes more than 50% of global industrial metals and steel production.

While China will continue to retain its status as a behemoth in the commodity markets, India can still be a “significant influencer,” says ANZ.


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