According to Mr Marius Kloppers CEO of multinational resource group BHP Billiton, Chinese steel consumption has peaked and will progressively decline as the country moves from an investment led to a consumer led economy.

In the past decade, over 200 million people in China have moved from rural to urban areas, driving demand for commodities such as coal and iron ore, and materials such as cement and steel, which are needed to build roads, buildings and railways

Mr Kloppers said that "To illustrate the significance of this, we witnessed a tripling of per capita steel consumption in the last decade from 150 to 450 kilogram per capita."

He said that but the period of early stage infrastructure has peaked. He added that "We will continue to see per capita consumption of steel growing, albeit at a slower rate, as steel intensity of GDP declines."

As a key steelmaking ingredient, iron ore consumption will be affected by this trend. The company is expecting growth in the global iron ore market to slow to 650 million tonnes this decade, down from 800 million tonnes in the past 10 years, but the slower growth still represents a very substantial opportunity.

At the beginning of the Chinese industrialization boom, miners were not producing enough to meet demand. The supply shortage not only drove prices up, but also prompted increased investment in the industry.

Mr Kloppers said that "What we are now witnessing is the rebalancing of supply and demand and a progressive recalibration of prices back to long term, sustainable pricing levels."

According to the CEO, the record prices of the past decade will not be there to support returns over the next 10 years and therefore production at any cost will be replaced by a greater attention to lowering costs and increasing productivity.

China's growth over the past decade involved new cities, buildings, roads, housing and other general infrastructure to support the massive urbanization trend.

He said that "As these cities and buildings are completed and as people continue moving to the cities, their future needs will include the next level of consumer goods being kitchen appliances, heating and air conditioning, cars and so on."

Source - Business News Americas

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