Demand for resources outstrips supply

Lat year, there was a serious, global shortage of key mineral products such as iron ore, copper and zinc.

Shortage of supply reason for high prices: This was not so much about price as supply. That shortage was driving prices to unbelievable levels. Contract prices for iron ore of more than $US100 would have been unimaginable only three years ago, yet they were almost a reality.

China the reason: China, of course, was the reason this was all happening. It was about to supersede the US as the main engine of global economic growth, and has emerged in just five years as the largest user of most major minerals and metals. Rather than fight BHP’s plan, China was looking to use its place at the head of the customer queue and the power of its capital reserves to buy strategic positions in resource owners worldwide.

Demand outstrips supply capacity: Prices for a basket of minerals have hit absurd levels because global demand has so vastly outstripped the capacity of the industry to supply product.

The Australian, 15/11/2007, p. 22

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