It is the world’s largest consumer of raw materials and has been the single biggest driver of the commodities bull run. So China’s latest five-year plan, the economic blueprint that will dictate future demand, will be nothing short of market-moving.
The policies that are being hammered out this week in the Great Hall of the People in Beijing will set the tone for China’s consumption of everything from iron ore to copper and cotton. At the heart of the plan, which will cover 2011-2015, is a shift towards cleaner, slower growth. But analysts believe this is unlikely to translate into less demand for raw materials.
“Commodities demand over the next five years will remain robust,” says Graeme Train, analyst at Macquarie. “The key difference is that growth in that demand will slow quite considerably.” He expects steel demand growth will fall to 6-7 per cent over the next five years, after averaging around 17 per cent during the past 10 years. “Iron ore prices should stay at elevated levels over the next five years,” he says.