A Continuing Demand for Commodities
It is our firm belief that the demand for commodities is driven by many factors, population growth, the emergence of China, India, and Africa. Prices will fall and rise, however, over the longer term, prices must rise as demand will outstrip supply.
China, India and the rest of the developing world will eclipse the west in a dramatic shift in the balance of economic power over the next 50 years, according to research by the Organisation for Economic Co-operation and Development (OECD).
Over the next half century, the unweighted average of GDP per capita (in 2005 PPP terms), is predicted to grow by roughly 3% annually in the non-OECD area, as against 1.7% in the OECD area.
As a result, by 2060 GDP per capita of the currently poorest economies will more than quadruple, whereas it will only double in the richest economies.
China and India will experience more than a seven-fold (700%) increase of their income per capita by 2060.
The extent of the catch-up is more pronounced in China reflecting the momentum of particularly strong productivity growth and rising capital intensity over the last decade. This will bring China 25% above the current income level of the US, while income per capita in India will reach only around half the current US level.
In a paper published in September, 2014, in Science, demographers from several universities and the United Nations Population Division conclude that instead of levelling off in the second half of the 21st century, as the UN predicted less than a decade ago, the world’s population will continue to grow beyond 2100.
For the first time, through the use of a “probabilistic” statistical method, the Science paper establishes a range of uncertainty around its central estimate-9.6 billion Earthlings in 2050, 10.9 billion by 2100. There’s an 80 percent chance, the authors conclude, that the actual number of people in 2100 will be somewhere between 9.6 and 12.3 billion.
Both groups foresee India becoming the world’s most populous country, with its numbers peaking around 2070 and declining to around 1.5 or 1.6 billion by 2100. Where they differ most is in their estimates of the coming population decline in China and of the coming population explosion in Africa south of the Sahara—where most of the world’s growth is expected.
According to the UN, the population in that region could quadruple, from less than one billion to nearly four billion. Africa in 2100 would be as densely populated as China is today.
No one, it seems is predicting a global no growth scenario. In fact, the prediction seems to be a call for average future global GDP to be at four percent with developing countries clocking in at a six percent average.
That means a lot of continuing forward demand for commodities. Global demand seems to be well supported by the statistics, economic growth in emerging economies will continue because of:
Industrialization
Urbanization
Population growth
Higher reserve price
The facts are:
Global economic growth is going to continue
As long as developing countries commodity demand grows at a faster rate than global supply, prices will rise
There will be no demand destruction in developing economies as prices rise
A Continuing Demand for Commodities September 9th, 2015admin
