JP Morgan Asset Management Predicts Demand for Commodities Will Continue to Rise in Emerging Economies Along-side Urbanisation
Globally 180,000 People Move from Rural to Urban Areas Every Day
Dubai, United Arab Emirates
Global commodities remain a good investment opportunity for 2010 on the back of strong growth in 2009, where commodity investors saw returns rise inline with significant price increases for key commodities, a senior executive from J.P. Morgan Asset Management told more than 100 independent financial advisors at a meeting in Dubai today.
Last year saw the price of copper, zinc, base metals, and aluminium rise by 140 percent, 112 percent,104
percent, and 44 percent, respectively, as a result of growing global demand for commodities coupled with on-
going supply shortages.
This year demand for commodities is set to continue to increase as emerging economies, such as China, India, Brazil, and Russia (BRIC) buy-up key building materials to meet massive infrastructure plans, fuelled by urban migration.
In the last nine years, for example, China’s demand for copper has quadrupled to the point where it now buys up almost 50 percent of the world’s copper supplies – a trend that is predicted to grow in the coming years as China invests billions in the construction of railways, roads, and structures to cater for its 1.3billion population.
Meanwhile, the global recession of 2008 and 2009 has seen investment in the exploration and mining of commodities decline, leading to supply shortages that could last for another decade, until extraction catches up with demand.
“Commodities offered strong returns in 2009, and commodity investors can expect to see further opportunities for growth in 2010 as demand continues to outstrip supply,” said Simon Littmoden, Vice President, Business Development, MENA, at J.P. Morgan Asset Management.
“Looking at the emerging economies we can see huge growth in demand for commodities to build new railways, expressways, and structures. Commodities will continue to benefit from urbanisation, with the latest figures indicating that 180,000 people around the world move from a rural to an urban area every single day.”
“At a time of rising demand for commodities, supply has slowed, mines have been shut and extraction has stopped. When it takes an average of eight years to extract commodities from the ground, after an initial investment in exploration has been made, you can see that the affects of the global recession will last for years to come in terms of commodities,” Littmoden concluded.
The swift action taken by governments globally to tackle the financial crisis has also minimised the potential for a slowdown in demand for commodities from the emerging markets. Forecasts for 2010 Real GDP growth are positive for all four BRIC countries, standing at 4.8 percent for Brazil, 4.9 percent for Russia, 7.3 percent for India, and 10.9 percent for China, according to figures published in OECD World Economic Outlook in November 2009.
