India and China’s Urbanization Needs Zinc

- July 9th, 2018

As more people move to the city, demand for zinc supply is surging.

We’re living in an increasingly urban world. In the developing and developed worlds alike, global trends are pushing people together into massive cities.

The two most populous countries on Earth, China and India, were both once associated with very agrarian lifestyles for the vast majority of their working classes. Today, China and India are closely associated with the sprawling metropolises of Shanghai and Mumbai. The migration from the countryside to the city is an ongoing phenomenon across the globe. Approximately 30 percent of the global population lived in urban areas in 1950. Today, about 54 percent of humanity live in a big city.

With urbanization comes urban expansion, and with urban expansion comes serious demand for resources. Countries are scrambling to build and upgrade infrastructure to keep up with demand as cities become megacities, building metro trains, housing complexes, energy plants, and any number of facilities required to sustain rapidly growing populations. Zinc and other base metals are essential to all of this, playing key roles in the production of steel, batteries, automobiles and more of the indispensable components of urban expansion.

The market has responded to this demand for base metals, along with noted issues on the supply side that have contributed to a significant increase in prices. This is why, according to Transparency Market Research, the global base metal mining market is expected to reach 160.16 million metric tons by 2023, at a compound annual growth rate of 5.01 percent.

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Global urbanization

The shift from the country to the city is global and massive. In 1950 there were only two cities with populations over 10 million – New York and Tokyo. Today there are 26. The United Nations and the International Organization for Migration have both estimated that three million people globally are moving to a major city every week.

The biggest factor driving the global urbanization phenomenon is automation. The third wave of the agricultural revolution has mechanized farming to the point where fewer workers are needed in the fields, and those displaced farmers have been heading to the city in search of new opportunities. Interestingly, a new wave of agricultural mechanization could be imminent as autonomous technology renders even more human labor obsolete. While the agricultural revolution hit western nations in the early 20th century, it’s still ongoing in many developing areas, driving urbanization across the non-western world.

India is currently one of the fastest urbanizing countries in the world. The country’s city development began with independence in the late 1940s with the adoption of a mixed economy. The country’s Green Revolution began in the 1960s as a way to end the famines that had been plaguing the nation in the first half of the twentieth century and also rapidly modernized the country’s agriculture industry by deploying more efficient technology. In recent years, India’s private sector has expanded at an incredible pace, and so too has urbanization. In 2016, the country shot up 19 spots in the World Bank’s rankings of foreign investment in infrastructure to 35th place out of 160 countries. India’s urban population grew by almost 230 million people between 1971 and 2008 and it is expected to grow by another 250 million within less than 20 years.

To keep up with this trend, India is expanding its transportation infrastructure. The country’s aviation sector is in the process of building new airports around the country as well as modernizing existing international airports to address increased demand for air travel. Additionally, the Indian government has announced upgrades and modernization of 600 railway stations across the nation.

China, meanwhile, is driving its massive ongoing economic growth through coordinated urbanization. Over the last 30 years, China’s proportion of people living in urban areas has grown by 26 percent. Urban development in China became official policy in 2014 with the introduction of the National New-type Urbanization Plan, which involves the mass relocation of 250 million Chinese citizens from farming regions into cities. The plan also involves the demolition and reconstruction of aging residential and commercial buildings as well as infrastructure along with the construction of high speed rail to connect every city with a population of more than 200,000 people.

Like India, the move of China’s people to cities is happening at breakneck speed. By 2030, 60 percent of the country’s massive population will be in urban areas. Today, 25 of the world’s 100 largest cities are in China.

Urbanization requires zinc

As cities in China, India, and around the globe continue to expand, and as industry and government continue to build up infrastructure to keep up with this expansion, the basic building blocks of urbanization become more and more valuable.

Global urban infrastructure expansion is built with zinc. Among other important purposes, the base metal is necessary for the process of galvanizing the steel needed for these massive infrastructure undertakings. The railways that connect New Delhi with the Indian countryside, the expanded power grids needed to serve China’s exploding population, the solar cells needed to mitigate the cities’ dependence on finite fossil fuels, these are all vital infrastructure projects that require large amounts of base metals to be accomplished.

Because of this, demand for zinc and other base metals is at an all time high.

The market may have trouble keeping up with this demand. In an effort to mitigate the country’s smog problem, China closed down 26 zinc mines in 2016, accounting for 11 percent of its zinc production, and an additional eight mines were shut down or suspended in 2017.

Supply-side issues can be contributed to additional zinc mine closures occurring in Australia, Ireland and Canada with relatively few new mines in production around the world.

Takeaway

High demand and low supply have resulted in the overall price increase of zinc and other base metals.  Zinc recently hit a 10- year high of US$1.60 per lb, and the price is not expected to see a significant decline any time soon. According to a number of institutions with an eye on the industry, the price should remain steady through 2019 until new and returning producers can level out the supply.

This INNspired article is sponsored by Zinc One Resources Inc. (TSXV:Z, FSE:RH33, OTC:ZZOF) . This article was written according to INN editorial standards to educate investors.

 

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