Commodities Demand in Asia Surging on Infrastructure Boom, LME Chief Says
July 9 (Bloomberg) -- London Metal Exchange Chief Executive Officer Martin Abbott talks with Bloomberg's Rishaad Salamat about demand for commodities in Asia and the LME's growth strategy in the region. The London-based exchange, founded in 1877, has entered talks with Singapore Exchange Ltd. on possible cooperation in Asia, according to a statement yesterday. The LME opened its first overseas office in the Southeast Asian city-state this year. Abbott, speaking from Singapore, also discusses regulation for commodity trading. (Source: Bloomberg)
Growth in demand for commodities including metals in Asia is surging as nations ramp up infrastructure spending, according to the head of the London Metal Exchange, the biggest marketplace for industrial metals.
“Everywhere we look in this region, we see growth,” Martin Abbott, chief executive officer of the LME, said in an interview on Bloomberg Television in Singapore today. “All of the numbers are so impressive,” Abbott said.
Asian nations including China are leading the global economy out of recession, boosting demand for metals such as copper, nickel and tin. The LME has announced talks with Singapore Exchange Ltd. on cooperation, and plans more metal warehouses in the world’s fastest growing region.
“We are recognizing that the growth in Asia is not cyclical, it is structural, and more and more of the business that we transact is going to be derived in this region,” Abbott said. “This is not simply a China story.”
Three-month copper futures have advanced for seven of the past eight years driven by rising Asian demand, and the contract has climbed 37 percent in the past 12 months to $6,717.25 a metric ton today. The LMEX Index of six industrial metals has gained 30 percent over the past year.
‘We See Growth’
“When you look at what’s happening throughout Asia, I think we’re looking at a long-term story of infrastructure build, industrial build and GDP growth,” Abbott said, citing expansions in Indonesia, Vietnam and Malaysia.
Abbott’s view echoes that of commodity bulls such as Singapore-based investor Jim Rogers, who has said that economic growth in Asia is powering demand. Rogers said earlier this week that “you should own commodities because that’s your only refuge,” backing silver and farm goods such as rice.
The International Monetary Fund yesterday raised its forecast for global growth to 4.6 percent this year, reflecting a stronger-than-expected first half. The lender increased the 2010 growth forecasts for China to 10.5 percent and for India to 9.4 percent for the year to March.
China’s economy expanded 9.1 percent last year, boosted by an unprecedented 9.59 trillion yuan ($1.4 trillion) of credit extended by banks in 2009 and a 4 trillion yuan, two-year fiscal stimulus plan. The nation is the world’s largest metals user.
Indonesia, Southeast Asia’s largest economy, may accelerate to 5.9 percent growth this year, Finance Minister Agus Martowardojo said yesterday.
Singapore Talks
The London-based metal exchange, founded in 1877, has begun talks with Singapore Exchange Ltd., operator of the local derivatives and securities exchange, on possible cooperation, according to a statement yesterday. The LME opened its first overseas office in the Southeast Asian city-state this year.
“The crisis has been a huge opportunity for the LME,” Abbott said yesterday to mark the exchange’s new Singapore office, referring to the global credit crisis. “We have actually seen more business coming onto the exchange because of the crisis, because companies are even more aware of the need for counterparty risk management.”
Abbott, who became chief executive of the LME in 2006, has overseen the introduction of cobalt and molybdenum futures. Trading volumes last year were the second highest on record after 2008, with a notional value of $7.4 trillion.
“We are agnostic about price,” Abbott said today. “We are not agnostic to cyclical and structural trends,” such as the industrialization of Asia, he said.
To contact the reporters on this story: Claire Leow in Singapore at cleow@bloomberg.net; Rishaad Salamat in London at rishaad@bloomberg.net
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