Gadget hungry China to drive 'lifestyle' metal gains, PwC says

[MELBOURNE] China's swelling middle class is poised to drive long-term demand gains for metals including copper, zinc and nickel as the world's second-largest economy transitions to consumer-driven growth, according to PricewaterhouseCoopers Australia.

The urbanization of the world's most populous nation, which moved about 300 million people to cities in the past 20 years, promises to herald an increased need for metals required to make every kind of consumer product from smartphones to refrigerators, PwC Australia's Melbourne-based national mining leader Chris Dodd said in an interview.

"We're heading towards the period in China for the lifestyle metals to really come to the fore," Mr Dodd said by phone.

"If you currently have a mobile phone in your hand you are not going to tolerate a scenario where you don't have one in the future. If you've ever put an air conditioner in your house, you are not going to live without one."

While metals prices have tumbled this year as the Chinese economy expands at the slowest pace in two decades, copper and nickel are likely to be the first to emerge from the rout in commodities, according to T Rowe Price. Rising populations and growing wealth in emerging economies will be the primary driver of longer term demand and in particular, for industrial metals, energy and fertilizers, BHP Billiton said in February.

The Bloomberg Commodities Index touched the lowest since 1999 last week amid China's cooling economy. China's gross domestic product increased in the third quarter by the least in six years and October trade data released Sunday showed imports slid for the 12th month in a row.

Still, China's urban population will probably increase by a further 170 million people in the next decade, while globally about 70 million people a year are entering the world's middle class and boosting demand for materials, according to Rio Tinto Group.

Copper wire is used in appliances, including washing machines and refrigerators, while nickel is needed for phones, computers and vehicles. Minerals supplied by the biggest miners are required in everything from Apple's iPhones to automobiles, Rio's chief executive officer Sam Walsh said in September.

Producers are positioning to meet demand driven by consumers and also to swoop on distressed assets and companies amid cratering commodity prices, Mr Dodd said on Monday in the interview, before addressing the International Mining and Resources Conference in Melbourne on Tuesday, alongside executives from MMG and Antofagasta.

"I get the feeling that there's a bit of a glint in the eye of some of senior players in the industry who see this as their next opportunity," Mr Dodd said.

Rio flagged in May it's prepared to look for a deal if it can secure the right asset and win investor backing, while BHP has said it could be tempted by copper to petroleum acquisitions. Glencore has flagged the potential sales of two copper mines as it seeks to cut debt, while Anglo American agreed in August to sell two Chile copper projects for as much as US$500 million.

Chinese homes will use 800 million air conditioners by 2025, double the number in 2013, according to Rio estimates. Retail sales of telephones in China jumped 42 per cent in September compared to a year earlier, spurred by the launch of the iPhone 6S, Bloomberg Intelligence said last month.

BLOOMBERG