On the panel:
There are three important factors in today’s commodities market.
The first is China.
This country has seen astronomical growth over the last few decades but in the recent years has stabilised at around 6% GDP growth. Although this is an incredible amount by western standards it sent a shock wave around the world’s markets. What caused this rising nation to slow its rapid expansion? China has already urbanised 200 million people and plans for another 150million so their desire for materials isn’t going anywhere, but it’s now clear that they want more than just housing. They want consumption. Only this year did consumption outpace investment and now makes up for more than 50% of China’s GDP. The government also made a promise to its people to raise them from poverty. Turning their economy to focus on advanced tech and consumption is exactly how you raise individual incomes. Finally, China is no longer the cheapest place to manufacture, with Mexico boasting 20-30% lower wages. This undercut threatens China’s cheap labour jobs and so they are evolving past the need for them. That is one of the reasons the Belt and Road initiatives focus on promoting growth in foreign nations. China needs a new market to sell its expensive goods, one that currently does not exist.
The second factor is Trump.
Trump was not a player anybody saw coming. Since his ascension to the white house, he has been very brash with his actions. His New York real estate style is mimicked in his global dealing. Since losing the house in the midterms he must look to foreign affairs to gain him enough support to be re-elected. His tough approach on Iran and its oil export have caused scepticism in a market, whose core product is losing value. In this, China sees an opportunity. For the first time, American has a president willing to give up territory, a president who’s hungry for glory and willing to put it all on the line. It is an uncertain future. So, the likely outcome is the USA and China will crack a deal and North Korea will no more. China gets 25 million workers who are even cheaper than Mexico as well as a vast amount of mineral resources, and Trump gets his glory.
The rise of the EV is the third factor.
As stated above, oil is losing values and Norway and Saudi are selling their asset while Shell has just done a massive stock buyback rather than invest in infrastructure. Unfortunate people may be sold a time scale that is not feasible. Tesla’s production problems and the lack of an industrial power storage systems have tested the faith of the investors and, if oil drops, the adoption of the EV may be delayed by years.
So, a superpower looking to change the dynamics of its entire economy, and a man with what looks like no plan, and a technology that is all trousers and no stuffing. Long term predictable markets loved by the mining industry are being threatened and the next 10 years will see dramatic changes in geopolitics and who holds sway over the market.
By Joshua Powell