China: hungry for commodities

China: hungry for commodities Wednesday, December 19, 2007

Posted by ei-forum in US Traded Stocks.
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We always read about China’s appetite for commodities and the fact that the Chinese are largely responsible for the increase in demand but we had only seen figures relating to wheat and other farming products.

We recently came across some numbers that we though might be interesting for you in terms of China’s weight in the increase in demand:

Steel: 65%
Aluminum: 57%
Copper: 93%
Zinc: 93%
Nickel: 71%

One interesting company to look at for this increase in base metal demand and therefore consumption is Companhia Vale (RIO). They are a diversified metals and mining company. The Company is a producer and exporter of iron ore and pellets and a producer of nickel. It also produces copper, manganese, ferroalloys, bauxite, precious metals, cobalt, kaolin, potash and other products. The Company is actively engaged in mineral exploration efforts in 19 countries worldwide. It operates logistics systems in Brazil, including railroads, maritime terminals and ports that are integrated with its mining operations. Directly and through affiliates and joint ventures, the Company has investments in the aluminum, coal, energy and steel businesses.

Despite having had a lot of attention recently, valuation is still reasonable and it is ideally placed to take advantage of this demand and future industry consolidation.

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