Don Lindsay of Teck Resources says investment analysts need to take a closer look at China’s growth plans and the impact on metals and commodities.
The CEO of one of Canada’s largest mining companies took a swipe at Wall Street analysts Tuesday, saying they underestimate China’s economic growth and the future impact on demand for copper, zinc and other key commodities.
Teck Resources Ltd. (TSX: T.TCK.A, Stock Forum) (TSK: T.TCK.B, Stock Forum) (NYSE: TCK, Stock Forum) President and Chief Executive Officer Don Lindsay says the double digit growth rate of previous years may be a thing of the past.
However, Lindsay said analysts may be overlooking the fact that an expected growth rate of 7% or 8% this year is actually larger in absolute terms than the growth of 10% to 12% that China experienced six or seven years ago.
“I sometimes think that Wall Street doesn’t know how to do math anymore,’’ he told an audience of mineral explorers at the Roundup mining conference in Vancouver.
“But literally if you do the math, a growth rate of 10% to 13% six or seven years ago added up to $250 to $350 billion of absolute incremental GDP. Today’s growth rate of 7% has $550 billion.”
Lindsay said Teck doesn’t care about percentages. “We care about the tonnes, and I can assure you that the tonnes are going up,’’ he said.
As Canada’s largest diversified mining company Teck cares deeply about economic growth rates in countries like India and China because its key business units are focused on copper, steelmaking coal, zinc and energy.
So when the Vancouver-based company invests $10 billion in copper mining projects in Chile, it is really making an investment based what it thinks those countries will consume in the next several years.
To remind them of this, shareholders who attended the company’s recent annual meeting were handed cards that spell out the objectives in China’s latest 5-year growth plan.
They include:
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A 200,000 kilometre increase in transmission lines.
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Plans to construct 36 million low income housing units.
To put this in perspective, Lindsay said 200,000 kilometres of transmission lines would be enough to replace every single power line in Canada.
“If I have learned anything about China, it is that if they set an objective in their 5-year plan they will achieve it,’’ he said, adding that the numbers are equally staggering for both roads and pipelines, and railways.
If China’s forecasts are not sufficiently startling, Lindsay says analysts should take a look at India, a country that is calling for one trillion dollars worth of infrastructure spending by 2017.
“Often they announce numbers that are really impossible to obtain,’’ said Lindsay, who recently led a mission of Teck’s senior management to India.
“But they indicate the direction that they are going and that in itself is important.’’
For example, if India’s steel production forecasts are correct, a company like Teck would be investing $4 billion to $5 billion right now in coking coal operations and hiring up to 1,500 miners, he said.
The Teck CEO said India and China are examples of how the world needs the commodities that the mining sector can produce and will continue to need them for the forseeable future.
“So while there will always be ups and downs in the economy, I believe that our industry remains well positioned for significant growth,’’ he said.
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