In an interview with the Japanese business daily Nihon Keizai Shimbun, VanditaPant, chief commercial officer for international commodity market analysis at Australian resource giant BHP Billiton, said that the Chinese economy will rebound in the second half of 2023 compared to the first half. China, the largest consumer of non-ferrous metals such as copper, has been criticized for its slow economic recovery. VanditaPant believes that the government’s stimulus policies will support the economy in the future.
BHP Billiton is the world’s largest resource company by total market value, with more than 5 trillion yen in revenue from China, accounting for 60% of the total. After China shifted its epidemic prevention and control policy, consumption of personal services, mainly tourism and catering, recovered somewhat, but manufacturing and fixed asset investment faltered.
VanditaPant said there had been no change in her optimism since the start of the year that “China will bring stability [to global commodity markets] this year”.
One of the reasons is to support the real estate market, which has been adjusting for a long time. The Chinese government unveiled a package of 16 financial support policies last November. “Given that it will take six to nine months for these policies to take effect, I think [the economy] will be better in the second half of this year than in the first half,” VanditaPant said.
On the real estate market, he said, “From January to March, developers’ loan financing performed well. “Although the momentum weakened in April and May, liquidity in the real estate sector is improving from the beginning of the year due to capital inflows.”
In China, it takes time for employment and incomes to improve, and “commodity consumption” has remained sluggish after changes in epidemic prevention measures. “The originally sluggish car sales are also recovering, with a significant change compared to the service centered period of January to March, and durable goods consumption is beginning to show growth momentum,” said VanditaPant. On June 6, the World Bank raised its forecast for China’s real economic growth in 2023 by 1.3 percentage points from its January forecast in view of the post-COVID-19 economic recovery.
International prices for copper, about half of which China needs, were around $8,180 a tonne as of early June, down about 14% from a year ago. VanditaPant believes it will take about a year and a half to eliminate the oversupply that has contributed to the price decline. In addition, the resumption of mine expansion and new development delayed due to the epidemic and increased supply are also the main reasons.
However, VanditaPant believes the oversupply is only temporary. This is due to increased demand in decarbonisation areas such as transmission lines for renewable energy and pure electric vehicles (EVs). VanditaPant said that due to geographical constraints and other reasons, the new development of copper is becoming increasingly difficult, predicting that “the second half of the 2020s will turn into a structural supply shortage.”
BHP Billiton in May completed a deal to buy OZ Minerals, an Australian copper-nickel company, for about Y850bn. “Mergers and acquisitions (M&A) and investments in start-up companies are options,” she said, adding that would still consider acquiring related companies in the future.
Chile and Indonesia, which are major producers of lithium and nickel, are stepping up “resource nationalism” to monopolize their own resources.
There have also been attempts, like Indonesia’s, to force foreign companies to develop their own value chains by banning resource exports. VanditaPant warned that the moves would “hit competitiveness”, stressing that “the right approach is to think about how we can attract talent, capital and expertise, not force it”.