Projections to 2025 point to cities around the world constructing the equivalent of the entire land area of Austria – 80 000 km2 – in residential and commercial floor space, which will require $80-trillion worth of investment.
Moreover, Anglo American CEO Cynthia Carroll said at the diversified major’s latest set of results, which saw operating profit fall 38% to $3.7-billion, that demand growth from now to 2025 for container traffic was expected to grow at a compound annual growth rate of 7.2%.
The global car fleet, Carroll added, was projected to double to 1.7-billion by 2030, covering ten times the average distance between the earth and the moon and cities would need an additional $10-trillion in yearly investments.
While tough short-term demand conditions do confronted the industry, long-term demand and supply scenarios continued to point to the modern world being mining’s oyster.
The latest Economist quotes BHP Billiton as projecting another 250-million Chinese to swop their villages for cities in the next 15 years, which would follow the 200-million that did so between 2000 and 2010, and diversified major Vale of Brazil tells a similar story or mining-boosting urban growth on the way that should buoy mining.
Carroll pointed out further that as development in emerging countries shifted over time from investment to consumption, the pattern of demand would change - but still keep mining in the money.
As that shift from investment to consumption took place, the rate of demand for steel demand - and consequently iron-ore, coking coal and manganese - would moderate, but then the expanding middle classes in many emerging countries should boost consumption of precious metals and minerals - in Anglo's case, platinum and diamonds - as that transition occurs.
One billion people were forecast to enter the consuming classes by 2025 and Carroll emphasized that Anglo’s diversified and time-balanced portfolio was positioning the company well to take advantage of the structural changes in the global economy.
And what was happening on the supply front was, Carroll added, just as important to prices as was the long-term demand picture.
Supply constraints - as well as difficulties producers faced to deliver that supply - would support prices.
Projects were facing significant delays as a result of increasingly complex planning and permitting regimes, exemplified by what Anglo itself was experiencing with its Minas-Rio iron-ore project in Brazil, a country where 40 projects worth $225-billion are currently facing delays averaging 24 months.
Developing and developed countries alike were seeking a larger slice of the mining cake, whether it was through JVs with mining companies, windfall taxes, increased royalties and in some cases mining-asset expropriation.
Remaining resources are located in places difficult to access and which have under-developed or non-existent infrastructure.
At the same time, mining itself is becoming more difficult, more challenging with existing operations facing grade declines and higher waste stripping.
In an industry that thinks in decades rather than years, capital allocation and balance sheet management required discipline and sound judgment and Anglo it is invested in the right commodities and the right high-quality and low-cost assets at the right time.
Source: Creamer Media Reporter
