Natural commodities to continue to play a major role in world development: experts

Natural commodities will continue to play a major role in a globalizing world despite recent downward trends in prices and production, a panel of experts told the Boao Forum for Asia in Melbourne on Thursday.

Despite a global awareness surrounding the dangers of fossil fuels, Chinese and Australian heads of mining and energy companies have predicted that natural commodities will continue to play a big part in the future of product manufacturing for some time.

Andrew Forrest, chairman of Fortescue Metals Group, said while prices of base metals and other key commodities have fallen in recent times, so has the cost of operation and refining. He said the prices of commodities were often both cyclical and structural in nature.

"Commodities are actually not so depressed," Forrest said. "They've come down, but so have operating costs. If you're looking at margins to reinvest in the industry, they're at a point where you can make a return - they're at a healthy equilibrium."

Jason Chang, CEO of EMR Capital, agreed, saying that China's need for energy and materials has slowed over the last few years, but will continue to require huge numbers of commodities to continue their development over decades.

"It's cyclical but also structural," Chang told the forum. "China has been the game-changer and will be for decades. There is going to be a continuing demand for certain types of commodities.

"Clearly the world is (eventually) looking to move into a non-fossil fuel environment, but the infrastructure is not there yet."

Others argued that even though the world is slowly beginning to embrace "future tech" such as electric cars and renewable energies, there will always be a major demand for oil and petroleum in big business, as product manufacturing requires massive amounts of fuel to produce a growing number of goods.

"Oil consumption will continue to slowly rise as petroleum is used so much in product manufacturing (for China's middle class), not so much for car use," Xue Feng from CEFC Natural Gas (Shanghai) Co. Ltd said.

Meanwhile, Jiao Jian, senior vice president of China Minmetals Corporation, said while China's big move into the commodities landscape helped bump prices around the world for some time, the "leveling-off" is to be expected now the demand has fallen somewhat.

He said other burgeoning economies, such as India will one day create another, similar "boom" when they begin to require massive amounts of infrastructure and therefore commodities such as iron ore, coal and petroleum.

"It is cyclical, but mostly structural, because of supply and demand," Jiao told the Boao Forum. Endit