• Orica CEO Sees China growth at 5.5%-6% for rest of decade
  • Commodity markets hit by global volatility, margin headwinds

China isn’t the problem for commodities and its continuing economic growth will keep driving demand, according to the world’s biggest supplier of explosives to the mining sector.

“There may be hiccups along the way, but in the big picture China will continue to develop,” Orica Ltd. Chief Executive Officer Alberto Calderon told reporters Wednesday at the International Mining and Resources Conference in Melbourne. “So China isn’t growing like crazy, it’s still growing an enormous amount. China’s not the issue for commodities.”

Gross domestic product in the world’s most populous nation is likely to continue to grow at an annual rate of between 5.5 percent to 6 percent for the rest of the decade, according to Calderon. Chinese President Xi Jinping said Nov. 3 that average annual growth should be no less than 6.5 percent in the next five years.

Orica’s customers are grappling with commodities prices that have touched the lowest since 1999 amid faltering growth in China, the largest consumer of energy, metals and grains. The Bloomberg Commodity Index is heading for the fifth straight annual loss, the longest slide on records dating to 1991.

Commodity markets are being buffeted by “global market volatility, structural shifts and industry-wide margin headwinds,” Calderon said in a speech to the conference. Producers must also work with deposits that are “deeper, hotter, harder and more geographically isolated,” to develop new sources of supply, he said.

No New Boom

China’s urbanization isn’t likely to be repeated in human history, meaning mining companies must focus on improving their market share in energy to metals, independent economist Saul Eslake told the Melbourne conference on Tuesday.

“It feels like a shock, but really we are back to normal, back to life before the most dramatic price boom in a generation,” Calderon said in his speech. Prices will “remain subdued for a long time,” said the former BHP Billiton Ltd. executive, who accurately predicted in 2014 that iron ore’s benchmark rate would continue to slide. 

Copper is likely to fall into deficit from the end of 2017, with prices poised to rise in 2018, Chile’s vice mining minister Ignacio Moreno Fernandez said Tuesday in Melbourne. Chile is the largest copper-producing nation.

Melbourne-based Orica, which carries out about 1,500 blasts a day on its mining customers’ sites, said in August it will book impairment charges on property, plant, and businesses in the range of A$1.35 billion ($950 million) to A$1.65 billion, partly as a result of challenging conditions in the mining sector.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE