EVERYBODY knows the significance of the Chinese economy; everybody has their favourite awe-inspiring China story; everybody knows China is crucial to the global economic turnaround. But, despite all the accepted knowledge about China, its role, particularly in the basic industries sector, still somehow manages to amaze.
A good example yesterday was Johnson Matthey’s influential review of the platinum industry. In its 2009 Interim Review, the company suggests that global net jewellery demand for platinum is expected to climb 80% to 2,45- million ounces this year. This is despite net demand declines in Europe and North America.
The big differentiator is, of course, China where demand is extremely strong and is likely to reach the record level of 1,75-million ounces this year.
The picture is not all fabulous; some of the increase in demand is because of restocking. Also, overall demand for platinum around the world is actually forecast to decrease 4,4% to 5,92-million ounces this year, with the motor industry still under strain.
Yet overall, the lack of a significant negative translates into a big positive in the medium term. This saw in particular rise strongly yesterday, even as the platinum price hovered slightly lower.
THE Economist once labelled Africa The Dark Continent. Buildworks, which has transformed into the largest turnkey developer of electrical substations in sub-Saharan Africa, is intent on lighting it up.
Buildworks was primarily a building materials supply group before buying Conco, a high-voltage power, electrical substation and overhead cables group. It stands to benefit from Africa’s inadequate power supply. The d ark continent holds fortunes for companies such as Buildworks with billions worth of power projects in the pipelines.
While Buildworks’ building materials division took a knock as a result of the economic meltdown, its power and electricity division is proving a winner, growing revenue and earnings. And the good news for the group is that all is not lost in the building sector with the economy’s anticipated recovery next year being a key to a turnaround in that division.
The group already has operations in 14 countries, and is looking at further expansion.
ONCE upon a time South Africans used to have lots of fun during gold bull runs. Then SA was the world’s major producer, and a rising gold price helped lift the entire economy. Today with our gold mines struggling with low ore grades, high extraction costs and a strong rand, it somehow feels as if we weren’t invited to the party.
But how good is the party going to get? According to a Reuters report, here are what the major institutional players are predicting for the gold price.
Goldman Sachs expects to see it at 960/oz on a three-, six- and 12-month basis. Its relatively conservative estimates were made on Monday last week.
Commerzbank was a bit more bullish on the same da y. It sees gold averaging 1050/oz in the fourth quarter, rising to 1100/oz in the first quarter of next year before subsiding to 1000 in the second quarter.
Deutsche Bank said in a note on October 23 that it expected gold prices to average 1050 in the fourth quarter, rising to 1125 in the first quarter of next year.
One forecast that is no longer looking so outlandish is by Jim Rogers, chairman of Singapore- based Rogers Holdings and considered an authority on commodities. He believes gold will top 2000/oz in the next 10 years.
While that forecast was derided as “utter nonsense” by economist Nouriel Roubini, the man who predicted the economic crisis, Rogers says: “I think gold will go over 2000 some time in the bull market, but depending on what happens in the world it could go much, much higher. The old high, back in 1980 adjusted for inflation, would be over 2000 now. So we’ll certainly get there some time in the next decade.”
n The Bottom Line is edited by Colin Anthony.