China’s need for raw materials guarantees 15 years of revenue for Angola and Mozambique, Deutsche Bank says

4 September 2006

Beijing, China, 04 Sept – Chinese imports of raw materials from Angola and Brazil will continue to rise by between 10 and 20 percent per year over the next 15 years, which places the two Portuguese-speaking countries amongst the group of countries to benefit most from China’s growth, a study by Germany’s Deutsche Bank said.

The Deutsche Bank study projects that Africa and Latin America in general, and Angola and Brazil in particular, will benefit from the entry of funds from China, both due to increased demand from China for raw materials and to increased Chinese investment, led by economic, political and strategic considerations.

In terms of importing raw materials, the bank expects increases in imports of materials that are vital to industrial production and growth and an increase in demand for agricultural products caused by the reduced availability of arable land and increased personal income.

“For African oil producing countries, such as Angola, the Chinese need for ever more oil and its derivatives will be one of the greatest sources of economic growth,” the bank said.

Angola currently produces some 1.4 million barrels of oil per day and exports over 500,000 barrels a day to China. Angola was China’s largest oil supplier in the first half of 2006.

China is, after the United States, the second-largest consumer of oil in the world and consumed 318 million tons in 2005, and imported around 40 percent of the total.

“For African oil producing countries, such as Angola, the Chinese need for ever more oil and its derivatives will be one of the greatest sources of economic growth,” the bank said.

Deutsche Bank expects, for the 2006-2010 period, average growth of 20 percent per year on Chinese oil, coal and meat imports, and average increases of 10 percent on imports of iron ore, copper, manganese and wood.

Brazil is the third-largest supplier of iron ore to China and, in the first two months of this year, Brazilian exports of iron ore totaled around US$313 million, a 173-percent year on year increase.

China is the world’s largest consumer of iron ore, and accounts for a little over 40 percent of worldwide imports, but it is in growth of agricultural raw materials that Deutsche Bank expects the greatest opportunities for Brazilian producers.

“China’s increased consumption of meat is a huge opportunity for Brazil, which is the world’s second-largest producer and already supplies around 11 percent of the meat consumed in China,” the German bank’s study said.

“Considering that the average consumption of meat in China is 50 kilos per person per year, which is significantly below the annual average of 130 kilos in the United States, the increase in consumption should be maintained or even increase. On the other hand, the lack of pasture land for cattle could further boost Chinese meat imports,” it added.

In order to distinguish themselves from the Chinese meat industry, the bank advises Brazilian producers to “cover market niches such as ecological beef products or of a higher quality, for which demand should increase as standard of living increases.”

The worst news for Brazil is Deutsche Bank’s projection that China’s imports of soy, which is Brazil’s main export to China, will have an average annual rise of 4 percent.

China buys around a third of all the soy produced in Brazil. Figures from the Brazilian embassy in Beijing show that in 2005 Brazil exported 20 million tons of soy, with 35 percent ending up in China.

“China is also the world’s largest importer of paper pulp and was responsible in 2004 for 20 percent of the world’s imports. Brazil is one of its main partners, having supplied 8 percent of Chinese imports of paper pulp in 2004,” said Deutsche Bank’s analysts.

The bank said it believed that China’s investment in Africa and Latin America would increase substantially over the next few years.

Currently only the Sudan, Zambia, Peru and Mexico are part of the top twenty destinations fro Chinese investment, according to Global Insight, but Deutsche Bank expects changes in the country’s investment structure.

“Ina survey on the investment intentions for the next two to five years Chinese companies indicated that the overall percentage of direct investment in Africa and Latin America could increase by 15 percent up to 11 percent of the total,” the bank said. (macauhub)