World’s biggest steel producer warns of ‘severe’ industry crisis
Conditions in China’s steel sector are like a “harsh winter” that will be “longer, colder and more difficult to endure than we expected,” Baowu Steel's chairman said.
Until roughly 12,000 years ago – at least 90 percent of our history – we humans eked out a living by hunting and gathering. Our hunter-gatherer ancestors were replaced by farmers and herders who crowded into villages following the invention of agriculture.
Over the last 200 years a major resettlement pattern has emerged:
What was predominately a rural culture has been turned into a predominately urban one and the transformation is expected to continue. By 2050, according to ‘Global Urbanization’ by Eugenie L. Birch and Susan M. Wachter, 70 percent of the world’s population will be urbanized.
Urbanization is defined as ‘a rapid and historic transformation of human social roots on a global scale.’ There are many reasons for the long underway rural flight; greater and more varied economic opportunities; enhanced education and health care; much improved services such as entertainment and other urban amenities and an expectation of social mobility.
The advantages of living in a city can be summed up as:
In China the average salary for urban residents stood at 22,068 yuan in the first three quarters of 2013, up 9.5 percent year on year. The figure for rural residents rose by 12.5 percent year on year to 7,627 yuan. Urban consumption hit 1.76 trillion yuan in September, up 13.1 percent year on year, while rural residents spent 304.7 billion yuan, up 14.8 percent from the previous year.
“The rural-urban divide is quite evident. Megacities and large cities are the richest and have far better access to basic public services; smaller towns, secondary cities, and areas on the perimeter of urban centers are less rich; and rural areas are the poorest,” Kaushik Basu, World Bank’s Chief Economist and Senior Vice President for Development Economics.
In India there’s also a wide difference in wages between urban and rural areas. A male casual laborer can earn Rs 150 per day in rural areas, his urban counterpart receives Rs 180 a day – Indian Rupee (Rs) . A salaried employee in rural areas might earn Rs 300 per day but in urban areas the same employees daily earnings would rise to nearly Rs 450.
The Philippines’ overall ratio of rural-urban wage gap is 67 percent. When skilled and unskilled workers are considered separately a much higher ratio becomes evident.
Population Growth
At this moment there are slightly over 7 billion people living on this planet, an urbanization rate of 53 percent means there are roughly 3.71 billion urbanites in the world today. It has been estimated that by the year 2050 our global population will reach 10 billion people. If our global population does indeed reach 10 billion people and if Birch and Wachter’s expected urbanization rate of 70 percent is achieved, seven billion people, or almost the equal of today’s current world population will be considered urban.
Could we hit the ten billion people mark? Could 70 percent of us be living in cities by 2050? The answer is likely yes. Developing countries are responsible for 90 per cent of current population growth – these are on average very young people with many years of fertility/reproduction left to them. By the year 2025, in just 12 short years, 84 per cent of the world’s people will live in developing regions.
According to the World Health Organization (WHO) “Almost all urban population growth in the next 30 years will occur in cities of developing countries. Between 1995 and 2005, the urban population of developing countries grew by an average of 1.2 million people per week, or around 165 000 people every day. By the middle of the 21st century, it is estimated that the urban population of these counties will more than double, increasing from 2.5 billion in 2009 to almost 5.2 billion in 2050.”
The developing world’s urban centers are expected to burgeon, drawing 96 percent of the additional 1.4 billion people by 2030. Due to the overall growing global population – but especially an exploding urban population (urban populations consume much more food, energy, and durable goods than rural populations) – demand for water, food, housing, heat, energy, clothing, and consumer goods is going to increase at an astounding rate.
Today’s Copper Consumption
Let’s take at look at copper to see the future regarding living in a finite mineral world.
According to the International Monetary Fund (IMF) the consumption of metals typically grows together with income until real GDP per capita reaches about $15,000–$20,000 per capita (2005 int$) as countries go through a period of industrialization and infrastructure construction.
A few country’s stand out as well below the IMF’s $15,000.00:
Pakistan (and the other 113 out of 180 countries listed below the IMF’s 15,000 Int$ cutoff) are likely to continue to add significantly to global demand for copper for some time to come.
Reserves
Each year, the U.S. Geological Survey (USGS) estimates the amounts of reserves: the quantities of mineral that can be economically extracted or produced at the time of determination.
World copper reserves are currently placed at around 630 Mt. When considered as just a single consolidated global number copper reserves seem large and adequate for several decades of production at 2012 levels.
Unfortunately most people do not take into consideration that these reserves are made up of many separate deposits, each of which has to be considered as a standalone and on its own merits.
The economic viability of the world’s copper deposits are influenced by many factors that inevitably reduce the amount of copper that reaches production.
These factors are:
Location
Each of these deposits is also subject to geologic, engineering, environmental and political constraints that are always changing.
Consider
Tomorrow’s Copper Demand
According to the Minerals Education Coalition every American born will need 978 pounds of copper over their lifetime.
that we in the western developed world take for granted – electricity, plumbing, appliances, AC etc.
Out of a total of 10 billion people in 2050, 8.2 billion of them are expected to be in developing countries.
How much copper could they expect to use over their lifetime?
Will they each use 978 lb’s of copper in their life time? Is there 8 plus trillion pounds of new copper left to be mined in the world?
Probably not…
According to a September 2013 report from the United States Geological Survey (USGS) global land-based copper resources (contained in identified, mined, and undiscovered resources – undiscovered resource numbers are based on geological modeling, the copper should, might, be there) exceed 3 billion tons (6 trillion pounds). These identified, mined, and undiscovered resources do not include deep-sea nodules and submarine massive sulfides.
“Infinite growth of material consumption in a finite world is an impossibility.” E. F. Schumacher
“We’re living in a finite world, one in which resource constraints are becoming increasingly binding.” Paul Krugman, ‘The Finite World’
Conclusion
If we mined every last discovered, and undiscovered, pound of land based copper the expected 8.2 billion people in the developing world would only get three quarters of the way towards copper use parity per capita with the U.S.
Of course the rest of us, the other 1.8 billion people expected to be on this planet by 2050, aren’t going to be easing up, we’re still going to be using copper at prestigious rates while our eastern cousins play catch up.
Copper use parity isn’t going to happen, it can’t.
It’s this author’s opinion the developing world will not get a third of the way to our development levels here in the west before we all run out of USGS stated copper resources.
Consider that this game of ‘Copper Catch Up’ is not going to happen in 100 years, it’s happening now.
The world’s exploding population, the massive shift from rural to urban, the growth of a very consumption minded middle class in developing countries, it’s all happening now.
Add in finite, increasingly hard to source resources.
The effects will felt long before we actually start to run out of copper and there will be severe consequences:
Contact Richard (Rick) Mills via [email protected]
Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. Get in touch with him if you’re interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors.
His articles have been published on more than 400 websites, like the Wall Street Journal, Market Oracle, USA Today, National Post, Montreal Gazette, Vancouver Sun, CBS news, Calgary Herald, Resource Investor, Forbes and Financial Sense.
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