China's voracious appetite for commodities

China’s economy grew at a 9 % rate in 2008. It is one of the best growth figures in that year. This is despite the mortgage crisis hitting the US and by contagion, the rest of the world. Also, this has come after a decade long of double digit growth.

All this growth has increased China’s demand for commodities. In 2008, China consumed about 7.8 million barrels of oil per day. In the same year, the country consumed 3 billion short tons of coal, representing about 40 % of the world total. As for steel, it produced 37 % of the world total and used 35.5 %. In copper, China accounts for 29 % of the global usage in 2008.

To ensure a steady supply, China is embarking on a worldwide acquisition of natural resource based companies. In February this year, Chinalco agreed to invest US$19.5 bil in Anglo-Australian mining giant Rio Tinto Group. However, the investment was rejected by Rio Tinto. In June, Minmetals did successfully acquired OZ Minerals for US$1.4 bil. The prizes are a copper and gold mine in Laos and two zinc mines in Australia.

Sinopec had, in June, acquired Addax Petroleum Corp for US$7.3 bil. The buy gave Sinopec oil reserves in Iraq’s Kurdistan and West Africa. Two months later, Yanzhou Coal announced that it would buy Australian coal miner Felix Resources for US$2.9 bil. The following month, PetroChina said that it would buy 60 % of Athabasca Oil Sands Corp’s oil sands projects in Canada for US$1.7 bil.