Tuesday, May 28, 2024

Reko Diq: Value of Pakistan's Copper Deposits Soars Amid Surging Demand

The value of copper assets has surged 31.7% in the last six months, significantly surpassing the rise in tech stocks (20.2%) and gold (20%) in the same period. Growing demand for copper is mainly driven by increasing adoption of green technologies such as electric vehicles and growth in AI (artificial intelligence) data centers using the latest Nvidia chips. At current prices, the value of copper and gold deposits at Reko Diq in Balochistan province is nearly $200 billion.  

Comparing Asset Price Appreciation Over Last Six Months. Source: Wall Street Journal


Interest in developing Pakistan's Reko Diq copper and gold mines has also grown with widening gap between demand and supply of the metals. Dennis Mark Bristow, CEO of the Canadian mining giant Barrick Gold Corporation, has said the Reko Diq mining project in Balochistan province is “absolutely on track” and would be able to begin production by 2028, according to news reports. Bristow said Reko Diq is an “enormous project” in which the company would be investing $10 billion.

Growing Copper Supply-Demand Gap 


Clean Energy Driving Global Copper Demand. Source: IEA Via Nikkei


New infrastructure development is underway to connect Reko Diq with the national highway network. Barrick is building a link road to connect the mining project site with N-40 Quetta-Taftan national highway. Barrick chief says the company looks at the project as a “multi-generational investment,” adding that it wants all children under the age of 10 in the Reko Diq region to be in school by the end of 2024.  Similar infrastructure projects to support coal mining in Thar desert have brought socioeconomic improvements and human development for the local villagers. 

Reko Diq project is expected to employ thousands of workers during and after completion. Barrick has interviewed over 3,000 applicants from universities across Pakistan and selected 9 Baloch citizens, four women and five men, according to Bristow. “And they are now working on our mines in Argentina and they will go through a program of development and gaining experience from all our different operations around the world,” Bristow said, saying 30 such graduates would be employed in training programs with the company by the end of the year.  By Jan-Feb next year (2025), he said, 1,200 people would be employed, which would increase to 6,000 by 2026. “By the time we peak production, we will have employed 10,000 people,” Bristow told Arab News. 

Canadian mining giant Barrick Gold Corporation and the governments of Pakistan and Balochistan reached a deal to restart the Reko Diq mining project back in March 2022 on former Prime Minister Imran Khan's watch. Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper (worth $142 billion at $9,464 per ton) and 21 million ounces  (worth $50 billion at $2,367 per ounce) of gold. 

The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of  $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation  and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.

Related Links:

Haq's Musings

South Asia Investor Review

New Infrastructure Brings Socioeconomic Development to Thar Desert

Pakistan Revives Reko Diq Mining Project

Kachhi Canal and N-70 Projects Boost Pakistan's Balochistan

Iftikhar Chaudhry Scared Away Foreign Investors

Musharraf Earned Legitimacy by Good Governance

Vindictive Judges Pursue Musharraf

Rare Earths at Reko Diq?


20 comments:

Majumdar said...

Brofessor sb,

When you first introduced Reqo Diq to us chokwies in 2007 you estimated its value at a trillion dollar. Why have you scaled it down?

Regards

Riaz Haq said...

Majumdar: "When you first introduced Reqo Diq to us chokwies in 2007 you estimated its value at a trillion dollar. Why have you scaled it down?"

The highest estimate for Reko Diq I posted was $500 billion on Jan 14, 2011.

https://www.riazhaq.com/2011/01/rare-earths-at-reko-diq-pakistan.html


Here's what I wrote:

"What is conspicuously absent from the debate is the potential for extraction at Reqo Diq of rare earth elements that are even more precious and in much greater and growing demand for the latest high-tech equipment and batteries for all-electric autos, communications, and other applications than traditional precious metals like gold and silver. It is the estimates of these rare earths at Reqo Diq that could put the value of the contract at considerably more than the current best estimates of $500 billion for copper and gold"

Vineeth said...

Perhaps this is a bit off-topic, but a couple of days back there was a hard-hitting article in DAWN by Khurram Husain titled "The great CPEC mirage" that should serve as a cautionary lesson to Pakistan to not put too much faith in any single "game-changing" project or magic bullet to uplift its economy.

https://www.dawn.com/news/1836587/the-great-cpec-mirage

Though it had been long apparent to me that CPEC "the game-changer" was a road to nowhere and a hype lacking in sense and substance (especially considering the results, or lack thereof, after a decade of its "implementation"), what confounded me was why none of the Pakistani columnists I read didn't call out this grand delusion for what it really was all along. Instead, the oft-repeated narrative from them was that all the hiccups in the "game-changer" will be fixed once CPEC goes into the "next phase" (whatever that is), and Pakistan gets other countries to participate in it.

The CPEC project and the Gwadar port was always touted by its cheerleaders as "game-changing" due to its supposed strategic location. It is located close to busy shipping lanes in the Persian Gulf. It would act as a land corridor that links Western China to the Strait of Hormuz. It would give a sea-port in the Arabian Sea to the land-locked energy-rich Central Asian nations. Investments would flow in when China industrializes its arid West and shifts its factories to Pakistan. And so on.. The sky was the limit for the "flagship project of BRI", they said. In fact, when India chose to not join CPEC a decade ago (ostensibly over the "corridor" passing through disputed Gilgit-Baltistan), I distinctly remember that there were many liberal columnists here in my country as well who believed all this hype and slammed the Union government for its foolish and myopic decision to not join a game changing economic project that was going to alter the destiny of the region. India was going to miss out on a grand economic opportunity, they declared. (Not to forget that there was plenty of pressure from the Chinese government for India to join CPEC too, if I remember right.)

And here we are after a decade of the "game-changer" and Pakistan is still busy negotiating its next IMF bailout, while China seemingly wants to downplay the whole enterprise, or forget it altogether. Khurram Husain's candid article on CPEC is the first that I have seen from a Pakistani columnist that dared to say the emperor wasn't wearing any clothes.

I do not know if this was a case of Pakistani governments, politicians and analysts being genuinely deluded themselves for so long, or whether the authorities intentionally deluded the nation by over-hyping CPEC so that they can put off more sensible and pressing economic reforms that would have hurt their votebanks or other vested interests. Either way, "the great CPEC flop" should atleast serve as a reminder to Pakistan about the inherent foolishness in putting all its eggs in one basket, and trying to find shortcuts to economic development and prosperity without doing the hard work to get the basics the right.

Of course, this equally applies to India as well, but it is apparent India's political leadership and economic planners have shown a bit more sense than their Pakistani counterparts in pursuing necessary economic reforms after their long unhealthy obsession with "license raj" socialism.

Riaz Haq said...

Vineeth: "hard-hitting article in DAWN by Khurram Husain titled "The great CPEC mirage"


It may be a mirage to Khurram Husain but CPEC projects have had a huge positive impact on the people living in Pakistan's least developed areas.

https://www.riazhaq.com/2022/12/rural-pakistan-new-infrastructure.html

Take Thar coal projects for instance. These projects have helped connect Thar with the rest of country through roads and airpprts etc, and created lots of jobs for the local people, and gave them access to education and healthcare.


In a 2018 New York Times Op Ed titled "How Not to Engage With Pakistan", ex US Ambassador to Pakistan Richard G. Olson wrote: "Its (CPEC's) magnitude and its transformation of parts of Pakistan dwarf anything the United States has ever undertaken". Among the parts of Pakistan being transformed by China Pakistan Economic Corridor (CPEC) are some of the least developed regions in Balochistan and Sindh, specifically Gwadar and Thar Desert. Over 70% of Thar desert's population is Hindu.


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East-West infrastructure projects in Pakistan pose unique challenges. Sending hundreds of cusecs of water up more than a mile from the River Indus to Balochistan via Kachhi canal is one of these challenges. Another challenge is to improve and expand national east-west highways like N-70. These recently completed infrastructure projects linking South Punjab with Balochistan will boost agriculture and transportation sectors and bring economic benefits to Pakistanis living in the country's least developed areas.

Kachhi Canal Project:

Recently completed 400 kilometers in phase 1 of 500 kilometer long Kachhi Canal is now the longest irrigation canal in Pakistan. It stretches from the plains of South Punjab to the heights of eastern Balochistan where it will eventually irrigate over 700,000 acres of arid land, according to WAPDA (Water and Power Development Authority).


https://www.riazhaq.com/2020/04/kachhi-canal-and-n-70-highway-projects.html

Vineeth said...

Sir, are you telling me the "game-changing" China-Pakistan Economic Corridor was all about a few canals and polluting coal-fired power plants? Why did Pakistan even need China's money and expertise for building those? Where are the industrial complexes that China (and other nations) should have set up? Why is Gwadar port - the key poster child of CPEC - sitting empty? Above all, why is still Pakistan stuck in gruelling negotiations for yet another IMF bailout after 10 years of CPEC?

If I am not mistaken, CPEC was envisioned as an infrastructure network that would have transformed Pakistan by making it a key hub for energy shipments and industrial parks. And all it has to show so far for the "success" of this grand vision are canals and coal-fired power plants? It doesn't make sense.

Khurram Husain and Arifa Noor are two DAWN columnists whom I have grown to admire over the years - the former for his objective, matter-of-fact writing style backed up by numbers and statistics and how he explains complex economic concepts in layman terms, and the latter due to her biting political satire. I distinctly remember how a few years back when PM Imran Khan was flaunting high GDP growth under his government as a success story, Khurram Husain opined in his columns about how the numbers didn't add up and that Pakistan was only experiencing a short-term consumption-led growth driven by imports that would drain its fiscal reserves soon enough. And that was exactly what happened a year later. Now if Khurram Husain says CPEC is a mirage, I am inclined to believe him, and not just because it essentially confirms my own view.

Riaz Haq said...

Vineeth: "Khurram Husain and Arifa Noor are two DAWN columnists whom I have grown to admire over the years"

Like many Pakistanis, KH and AN are fans of Modi's "reforms" and how they believe India has benefited from them.

What they don't understand is the huge negative impact of such "reforms".

Modi's single-minded pursuit of formalization of Indian economy has destroyed India's informal sector which employs the bulk of workers. The result is massive unemployment and the return of a lot urban workforce to farms. No wonder Indians are among the most unhappy people in the world.


Here's a recent Wall Street Journal piece titled: To Understand India’s Economy, Look Beyond the Spectacular Growth Numbers

https://www.wsj.com/world/india/to-understand-indias-economy-look-beyond-the-spectacular-growth-numbers-31f5dd11

BENGALURU, India—India is set to be the world’s fastest-growing major economy this year, but economists say the country’s headline growth numbers don’t tell the whole story.

The South Asian nation’s gross domestic product grew at more than 8% in its fiscal year ended in March compared with the previous year, driven by public spending on infrastructure, services growth, and an uptick in manufacturing. That would put India well ahead of China, which is growing at about 5%, and on track to hit Prime Minister Narendra Modi’s goal of becoming a developed nation by 2047.

But the way India calculates its gross domestic product can at times overstate the strength of growth, in part by underestimating the weakness in its massive informal economy. There are also other indicators, such as private consumption and investment, that are pointing to soft spots. Despite cuts to corporate taxes, companies don’t appear to be spending on expansions.

“If people were optimistic about the economy, they would invest more and consume more, neither of which is really happening,” said Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics and former chief economic adviser to the Modi government.

Private consumption, the biggest contributor to GDP, grew at 4% for the year, still slower than pre-pandemic levels. What’s more, economists say, it could have been even weaker if the government hadn’t continued its extensive food-subsidy program that began during the pandemic.

The problem is driven in part by how India emerged from the pandemic. Big businesses and people who are employed in India’s formal economy are generally doing well, but most Indians are in the informal sector or agriculture, and many of them lost work.

While India’s official data last year put unemployment at around 3%, economists also closely track data from the Centre for Monitoring Indian Economy, a private economic research firm. It put unemployment at 8% for the year ended March.

At a small tea-and-cigarette stall in the southern city of Bengaluru, 55-year-old Ratnamma said many of her customers in the neighborhood, which once bustled with tech professionals and blue-collar workers, have moved out of the city and returned to rural villages. Some have come back, but she has fewer customers than she once did.

“Where did everyone go?” she said.

She makes about $12 a day in sales, she said, compared with as much as $100 on a good day in the past. It isn’t enough to cover her living expenses or repay a business loan she took out six months ago.

Economists say that the informal sector has been through three shocks in a decade—a 2016 policy aimed at tax evasion called “demonetization” that wiped out 90% of the value of India’s paper currency, a tax overhaul the following year that created more paperwork and expenses for small businesses, and the pandemic.

Syed H said...

Further to Mr Haq’s observations, what has been quite damaging for the bulk of India’s population is how its economic growth model this century has driven a remarkable increase in both India’s income and wealth inequality, to the detriment of the well-being of the bulk of its people, as documented in the recent study “Rise of the Billionaire Raj” of the World Inequality Lab by Nithin Bharti from NYU, Lucas Chancel from Harvard, and Thomas Pikety from the Paris School of Economics (https://wid.world/news-article/inequality-in-india-the-billionaire-raj-is-now-more-unequal-than-the-british-colonial-raj/).

The richest one percent of Indians have seen their share of national income go from 6 percent in the 1980s to more than 20 percent today. As for India’s wealth, they control 40 percent of it, up from less than 20 percent in the 1990s.

The richest 10 percent of Indians now control 60 percent of national income, up from 30 percent in the 1980s. They control 65 percent of India’s wealth.

Meanwhile, the bottom 50% of Indians saw their share of national income fall from 23 percent in the 1980s to 15 percent now. Remarkably, the 40 percent of the population below the richest 10% of Indians, essentially the much fabled Indian “middle class”, has seen its share of national income shrink even more dramatically from 45 percent in the 1980s to 27 percent now, quite unusual relative to countries that successfully developed. So lopsided has the income distribution in India become that the bottom 90 percent of Indians now make less than the GDP per capita of India.

India’s economic growth model this century is continuing to drive the widening of this already large gulf. In the Modi years of the last decade, the wealth of its billionaires grew 10 times faster than the growth of its national income. This has made India now more unequal in its wealth and income distributions today than even such notoriously unequal countries as Brazil and South Africa, indeed income inequality is now worse than during the British Raj.

As Mr Haq’s comment referencing the WSJ highlights, private consumption and investment is tepid and not in keeping with a supposedly fast growing economy. This is, as that piece mentions, in part because of poor accounting of the informal sector of the Indian economy (where so many of its poorest exist) by the Indian government. In particular, there has been a disastrous impact of Modinomics on this sector in the form of demonetisation, GST, and his Covid lockdown.

Low levels of private consumption and investment are also not surprising when considering the remarkable fall in the share of national income and wealth of the bottom 90% of Indians, driven not by one or two bad policies, but by the structural reality of India’s economic model especially in this century. The Indian economic “success story” is one that increasingly shunts the bulk of its population to the sidelines. Nearly half of all flights in India are taken by just 1 percent of Indians. Most its digital payments are made by less than 8 percent of its population. While consumption by the bottom 90% on items such as two-wheelers has at times stagnated in recent years, luxury goods sales have not. And so on and on. Bizarrely, for a supposedly fast growing developing economy, rather than a fall, there has actually been an increase in the share of Indians returning to the agriculture sector relative to five years ago (2022-23 Periodic Labour Force Survey).

India’s “rapid” economic growth does not translate into rapid growth for the majority of its population. It economic “success story” is fundamentally a success story of its very richest. In the most recent Global Hunger Index, India ranked lower than Pakistan (yes, the same Pakistan that Modi recently mocked for its hunger at an election speech); indeed, India is actually a hungrier country than North Korea. This is not a state of affairs one would expect from an economic “success story”.

Vineeth said...

Modi's reforms? What are they? I am not aware of any landmark "reforms" under his rule except a botched national tax rollout, a disastrous demonetization and encouragement of crony capitalism. And I don't remember Khurram Husain specifically praising Modi's management of the Indian economy either. Instead, what he do ask Pakistani leadership to emulate is the landmark economic liberalization that happened decades ago under the stewardship of P V Narasimha Rao and Manmohan Singh. Every Indian govt which came after essentially continued the same template that PVNR and MMS set early on - dismantling the notorious license raj, encouraging foreign investment, privatizing loss-making PSUs (SOEs in Pakistani lexicon), trimming bureaucratic red tape etc. Modi govt hasn't done anything drastically different from this playbook.

As for the reforms themselves, they are the reason why you don't see India standing right behind Pakistan in the queue for an IMF bailout. They essentially saved Indian economy from the looming threat of bankruptcy in the early '90s and revitalized its industrial sector by lifting curbs on industrial production, dismantling monopolies, encouraging competition and exports, and allowing foreign investment that finally brought modern products and technology to the Indian market after decades of stagnation.

The reason unemployment and poverty still remain at high levels in India is not because of these reforms themselves, but because the industrial growth hasn't managed to keep pace with population growth and that the successive Indian govts haven't invested enough in education, public health and social upliftment schemes in parallel. Had India not pursued economic liberalization, it would have been stuck in the same quagmire that Pakistan finds itself in.

Vineeth said...

And yet, it is the Pakistani economy that is constantly teetering on the brink of bankruptcy and it is Pakistan that has been knocking the doors of IMF every three years for a bailout, not India. No doubt India's economic growth story has been unequal due to a host of factors, but there can be no question that it is in a far better shape than Pakistan's due to stronger macro-economic fundamentals.

Vineeth said...

Happened to read yet another article on DAWN about CPEC, this time from the perspective of Chinese analysts. Once again, it is a story of Pakistan's exaggerated expectations from the project and the scale and spectrum of challenges Chinese have encountered while trying to invest in Pakistan. Of course, your article here was about Reko Diq and not CPEC, but the experience with the latter should serve as a wakeup call for Pakistani authorities and its people to not get deluded again with hopes that some new "game changer" project would appear to bail out its moribund economy without the need to invest in sustained and painful reforms.

DEVELOPMENT: WHAT THE CHINESE ARE SAYING ABOUT CPEC

https://www.dawn.com/news/1837268/development-what-the-chinese-are-saying-about-cpec

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One of the Chinese scholars’ major concerns has been Pakistan’s exaggerated and unrealistic expectations of CPEC, which they fear would be harmful for Pakistan and China relations in the long run.

Professor Xuemei Qian of China’s prestigious Peking University highlighted the vast difference in understanding about CPEC among Pakistani and Chinese people, stating, “Pakistani people… believe it [CPEC] is their hope to change their lives”, while for China, it is “just a project of the BRI.”

Qian writes that many Pakistanis regard CPEC a “game-changer” and even a “fate-changer”, expecting that, when completed, CPEC would bring fundamental changes to their lives. “However, whether CPEC can really change Pakistan, or to what extent can it change, is a question that can only be answered when it is completed,” she states. At the moment she said she was more concerned “whether CPEC can be implemented successfully.”

Qian also disputes the oft-quoted financial size of CPEC, amounting to $46 billion, stating that the figure was self-projected, and based on rough estimates of individual CPEC projects, calculated privately by some individuals.

She is of the view that this unauthentic figure was “translated by Pakistani media as well as the politicians” into the financial size of the project under their own motives, without any input or commitment on the part of the Chinese government.

...One of the primary concerns of many Chinese scholars have been the risks and threats to China’s FDI.

“Pakistan’s political risks are very high, only slightly better than Somalia and Syria,” commented Li. “Pakistan is significantly below the world average level in aspects of corruption control, government effectiveness, political stability and control over violence and terrorism, laws and regulations and rule of law, etc,” Li continues while advising Chinese stakeholders to exercise prudence while making FDI in Pakistan.

...To sum up, let me state that this is just a tip of the proverbial iceberg. Chinese scholars have written much more than that. A sort of consensus among them, in the words of Huang and He, is that “CPEC seems more challenging and high-risk than other corridors.”

I may add here that the only silver lining in the dark clouds for CPEC in the coming years is in China’s strategic interests in the Indian Ocean region.

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Riaz Haq said...

Vineeth: "DEVELOPMENT: WHAT THE CHINESE ARE SAYING ABOUT CPEC"

Quoting a bunch of different people---Chinese and Pakistanis and others---talking about CPEC seems like a group of blind persons describing an elephant.


Suffice it to say that CPEC is a BRI flagship project involving the largest single BRI investment in any country.

It is also true that China has emerged as the largest financier of global infrastructure projects in the world. It is now lending more than the World Bank.


Here's another view as reported in South China Morning Post:


China-Pakistan railway ‘worth it’ at estimated US$58 billion: study

Belt and Road Initiative’s most expensive transport infrastructure project ‘has potential’ to reshape trade and geopolitics

The rail link is part of a broader plan to revive ancient Silk Road connections and reduce reliance on Western-dominated routes

https://www.scmp.com/news/china/science/article/3218413/china-pakistan-railway-worth-it-estimated-us58-billion-study

The China-Pakistan railway – China’s largest Belt and Road Initiative transport project – will cost an estimated 400 billion yuan (US$57.7 billion), but should proceed because of its strategic significance, a government-commissioned feasibility study has found.

The proposed railway, connecting Pakistan’s port of Gwadar to Kashgar in China’s Xinjiang Uygur autonomous region, was assessed by scientists from the state-owned China Railway First Survey and Design Institute Group Co Ltd.
The team, led by the institute’s deputy director of capital operations Zhang Ling, said the project was the belt and road plan’s most expensive transport infrastructure.

Despite the cost, the project had the potential to reshape trade and geopolitics across the Eurasian continent and should be supported, the team said in a report published by the Chinese-language journal Railway Transport and Economy in April.
“The government and financial institutions [in China] should provide strong support, increase coordination and collaboration among relevant domestic departments, strive for the injection of support funds and provide strong policy support and guarantees for the construction of this project,” they said.
The institute is one of the largest of its kind in China and has been involved in many major railway projects at home and internationally, including Indonesia’s Jakarta-Bandung high-speed rail line.
The 3,000km (1,860-mile) railway will link China’s western regions with the Arabian Sea, bypassing the Strait of Malacca and reducing dependence on the South China Sea.

Connections with other transport networks – including in Iran and Turkey – would also provide a more direct route to Europe for Chinese goods, while Pakistan is forecast to get a much-needed boost from the improved infrastructure and easier trade with China.

The scheme is a key component of Beijing’s broader belt and road plan to promote economic cooperation and connectivity among the countries along the ancient Silk Road trade routes.

Previous studies by Chinese government researchers have suggested the infrastructure initiative could have significant geopolitical implications, helping to shift the balance of power away from traditional Western-dominated trade routes.
As well as encouraging a more multipolar world order, the belt and road plan could also help to promote economic development and stability in countries along the route by creating jobs, boosting infrastructure investment and increasing trade, the studies said.

Most belt and road transport infrastructure construction projects had received a significant proportion of funding from the host countries, and the scale of investment was much smaller, Zhang and his colleagues noted.

For example, total investment in Kenya’s Mombasa-Nairobi standard gauge railway was US$3.8 billion, with China providing 5 per cent of the funding and Kenya paying for the rest.

Vineeth said...

"Suffice it to say that CPEC is a BRI flagship project involving the largest single BRI investment in any country."

If China truly considers CPEC with its canals, coal-fired powerplants and an empty port as the "flagship project" of BRI, I wonder what is the state of China's other BRI projects.

As I see it, the so-called China-Pakistan Railway as described in that report is merely a recommendation by a Chinese govt-commissioned study. And the state-owned Railway companies involved in the said study would evidently have their own motives in championing the project in front of the government irrespective of its cost and commercial viability. But the key question here is, is the Chinese government prepared to foot the bill for it? China's Western provinces like Xinjiang are largely barren and without significant industries at present. So, what exactly is this railway (assuming Chinese are able to build it across the challenging terrain) going to transport? Chinese concerns about Straits of Malacca being closed off to shipping to-and-from its industrial heartland in the eastern provinces is only a hypothetical possibility at present. Investing billions in a railway that runs across an unstable region prone to geographical, weather and security challenges would make no sense in the absence of an economic rationale or pressing strategic need. Else that railway line would end up disused like Gwadar port itself. Moreover, with its economy facing a slowdown, I do not think Chinese would be too enthusiastic these days in splurging their money on gargantuan foreign projects with questionable returns.

Riaz Haq said...

Vineeth: "If China truly considers CPEC with its canals, coal-fired powerplants and an empty port as the "flagship project" of BRI, I wonder what is the state of China's other BRI projects."


If CPEC and BRI are such disasters as the western media have you believe, why spend so much ink and airtime to attack them?

The reality is that the West, particularly Washington, has so far failed to understand the long game China is playing. Only now are they beginning to realize that PRC is rapidly gaining on them.

Here's Biden Administration’s Approach to the People’s Republic of China - United States Department of State by Sec of State Tony Blinken

"China is the only country with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it".


https://www.state.gov/the-administrations-approach-to-the-peoples-republic-of-china/

Riaz Haq said...

Copper prices stay firm after hitting all-time high on AI demand, China recovery - Nikkei Asia



https://asia.nikkei.com/Spotlight/Market-Spotlight/Copper-prices-stay-firm-after-hitting-all-time-high-on-AI-demand-China-recovery

TOKYO -- The global benchmark price for copper recently climbed to an all-time high, amid expectations for strong AI demand and a Chinese economic recovery, despite heavy production by Chinese refineries and weaker-than-expected demand from the world's largest copper consumer.

Copper prices are expected to remain elevated for some time as traders and investors assess whether strong demand from data centers to power artificial intelligence, and from clean energy projects, materializes.

"Doctor Copper," as it is sometimes called, is seen an indicator of the health of the global economy. Consumption of the nonferrous metal often rises along with demand for infrastructure, which in turn increases as economies grow.



The benchmark three-month forward contract for copper rose to $11,104.5 per tonne on the London Metal Exchange (LME) on May 20, the highest level ever. It traded above $10,000 on Friday.

----
Prices are also being buoyed by predictions of a global push for renewable energy and electric vehicles, as well as more data centers to support the development of artificial intelligence, all of which will require copper.


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With China's economy slow to take off, the Asian market is not as tight as in the West. "We are seeing current demand from China softer than anticipated," said Joannides. End-use buyers are "taking a wait-and-see attitude by delaying placing orders with the currently elevated copper prices," she said.

Copper prices are widely expected to stay elevated. Wood Mackenzie expects a supply shortfall in the market this year. Australia's Macquarie Group forecasts an average price of $10,500 per tonne in the October to December quarter, after easing to $9,800 in July to September. Goldman Sachs forecasts a surge to $12,000 per tonne by the end of the year.

Demand arising from the "green transformation" and electrification, especially in emerging markets, is "offsetting the negative impact of China's economic slowdown," said Norinobu Ozawa, general manager of the nonferrous metal and ores trading department at Japanese trading house Marubeni. In 2024, "There are limited factors that can ease the supply-demand tightness in the short-term," in the face of a potential increase in Chinese demand, he said.

Over the longer term, Japanese trading houses expect demand growth to outpace supply. While copper demand from China is not as strong as in the past, "it is likely to continue growth at annual rates of about 2.5% to 3% over the medium and long-term," said a trader at Mitsui & Co., a Japanese trading house.

--

Macquarie predicts global demand for refined copper will rise 19% between 2023 and 2030, with China's own demand rising at 16% and the country remaining the world's largest copper market. India's demand will rise the fastest, at 61%, while demand from the rest of Asia is expected to grow by 25%. This takes into account demand related to data centers, the financial services company said.

Copper demand for data centers is estimated as about 200,000 tonnes, out of a total demand of about 25 million tonnes, according to Marubeni's Ozawa. "While this sounds like a small volume, it could be equivalent to one refinery" by 2030 onward, impacting the market, he said.

According to the International Energy Agency, clean energy will be a key driver of copper demand if the global energy sector is to reach carbon neutrality by 2050. The agency predicts copper demand for other uses will stay more or less flat until 2040.

Riaz Haq said...

Copper prices stay firm after hitting all-time high on AI demand, China recovery - Nikkei Asia



https://asia.nikkei.com/Spotlight/Market-Spotlight/Copper-prices-stay-firm-after-hitting-all-time-high-on-AI-demand-China-recovery


Copper prices are expected to remain elevated for some time as traders and investors assess whether strong demand from data centers to power artificial intelligence, and from clean energy projects, materializes.

"Doctor Copper," as it is sometimes called, is seen an indicator of the health of the global economy. Consumption of the nonferrous metal often rises along with demand for infrastructure, which in turn increases as economies grow.



The benchmark three-month forward contract for copper rose to $11,104.5 per tonne on the London Metal Exchange (LME) on May 20, the highest level ever. It traded above $10,000 on Friday.

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Prices are also being buoyed by predictions of a global push for renewable energy and electric vehicles, as well as more data centers to support the development of artificial intelligence, all of which will require copper.

Industry sources and analysts say the market has been tight in North America and Europe, partly due to demand from the renewable energy industry and electric vehicle manufacturers. In terms of supply, the LME barred the trading of newly smelted Russian copper in April. Miners have struggled to meet production targets and bring on new projects onstream, such as with the Cobre Panama mine, which halted operations due to protests in the Central American country over environmental damage and land sales to foreign companies.

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With China's economy slow to take off, the Asian market is not as tight as in the West. "We are seeing current demand from China softer than anticipated," said Joannides. End-use buyers are "taking a wait-and-see attitude by delaying placing orders with the currently elevated copper prices," she said.

Copper prices are widely expected to stay elevated. Wood Mackenzie expects a supply shortfall in the market this year. Australia's Macquarie Group forecasts an average price of $10,500 per tonne in the October to December quarter, after easing to $9,800 in July to September. Goldman Sachs forecasts a surge to $12,000 per tonne by the end of the year.

Demand arising from the "green transformation" and electrification, especially in emerging markets, is "offsetting the negative impact of China's economic slowdown," said Norinobu Ozawa, general manager of the nonferrous metal and ores trading department at Japanese trading house Marubeni. In 2024, "There are limited factors that can ease the supply-demand tightness in the short-term," in the face of a potential increase in Chinese demand, he said.

Over the longer term, Japanese trading houses expect demand growth to outpace supply. While copper demand from China is not as strong as in the past, "it is likely to continue growth at annual rates of about 2.5% to 3% over the medium and long-term," said a trader at Mitsui & Co., a Japanese trading house.

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Macquarie predicts global demand for refined copper will rise 19% between 2023 and 2030, with China's own demand rising at 16% and the country remaining the world's largest copper market. India's demand will rise the fastest, at 61%, while demand from the rest of Asia is expected to grow by 25%. This takes into account demand related to data centers, the financial services company said.

Copper demand for data centers is estimated as about 200,000 tonnes, out of a total demand of about 25 million tonnes, according to Marubeni's Ozawa. "While this sounds like a small volume, it could be equivalent to one refinery" by 2030 onward, impacting the market, he said.

According to the International Energy Agency, clean energy will be a key driver of copper demand if the global energy sector is to reach carbon neutrality by 2050. The agency predicts copper demand for other uses will stay more or less flat until 2040.

Vineeth said...

I never said anywhere that BRI as a whole is a disaster. I was talking only about CPEC. After a decade of its announcement, CPEC has almost nothing to show for its initial hype and euphoria about its "game-changing" potential (at least the way Pakistanis advertised it). All I see is an empty Gwadar port, canals, some coal-fired power plants and more IMF bailouts.

I'm just trying to say that Pakistanis should moderate their hopes on any such "game-changers" or of China coming to rescue Pakistan's teetering economy by translocating its industries, or building a railway across the treacherous mountains of Gilgit-Baltistan. About the latter, its not just about the technical challenges alone, but the costs and risks involved (including security threats posted by groups like TTP, ETIM etc from Afghanistan) and the uncertain returns from such a gargantuan venture. Granted, China has built a high-speed railway across difficult terrain to Tibet, and India is close to completing a rail line across the Pir Panjal to connect Kashmir valley with Jammu and the Indian "mainland". However these ventures had strong justifications in terms of national security and integration. China-Pakistan Railway seems to have no economic or strategic rationale to justify its cost at present.

And as can be seen in these reports, Pakistan can attract investment to the country only if its authorities get its act together to resolve a host of challenges the country faces in the form of an unstable political system, weak macro-economic fundamentals and militant attacks. No sane person, company or nation would want to risk investing their money in a country going through a "perfect storm".

Riaz Haq said...

John Oliver on Narendra Modi: ‘India seems to be sliding toward authoritarianism’

https://www.theguardian.com/tv-and-radio/article/2024/jun/03/john-oliver-narendra-modi-india


“Over the course of Modi’s rise, he’s chosen to be strategically quiet about his pseudo-authoritarian, pro-Hindu vision of India,” Oliver explained. “But there’s been a noticeable shift in his rhetoric this election season” toward anti-Muslim statements, such as a recent campaign speech in which he falsely claimed that his rival party would redistribute wealth to Muslims and referred to Muslim citizens as “infiltrators”.

“That’s already ugly enough,” Oliver noted, “but it’s also coming at a time when Modi and his party have seemed increasingly comfortable threatening democratic institutions by, among other things, stifling political opposition and freedom of the press. In fact, on multiple fronts, India seems to be sliding toward authoritarianism.”


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Modi has built his popularity in part on infrastructure and food distribution programs, delivering grain in bags with his face on it. “Which feels a little egotistical,” Oliver deadpanned. “It would be like if Lyndon Johnson signed the Food Stamp Act of 1964 but insisted that the food stamps be rebranded as ‘Lyndon’s Lucky Yum-Yum Voucher’. Good program but I don’t know, man, maybe turn it down a notch.”

Modi especially likes to brag about the economy, which under his watch has become twice as big as it was, though Oliver noted that those numbers were suspect, and that Modi’s government had also changed the definition of poverty. “Anyone can get rid of all poverty if you just change the definition of poor people to something else,” Oliver quipped.

The economic gains have been widely unequal; by some estimates, about 1 million people now control about 80% of the country’s wealth. “And as they’ve gotten richer, much of the country has gotten poorer – even with all those bags of grain with his face on them, under Modi, the country has fallen in the Global Hunger Index, and now sits behind North Korea and war-torn Sudan,” Oliver said. “And you would think that all of this would be fertile ground for Modi’s critics to exploit, but it’s actually hard to do that in India.” Modi hasn’t held a press conference in India in 10 years of rule, and the interviews he does grant are, as Oliver put it, “the opposite of hard-hitting”. News networks critical of his government have faced police raids for tax evasion.

“Basically, if you criticize Modi, there’s a good chance that things are going to be very unpleasant for you,” Oliver said. “Meaningful criticism of Modi is scarce on TV in India.”

Oliver also surveyed the BJP’s work to suppress opposition; weeks before the election began, tax agencies froze an opposition party’s bank accounts, and the head of another opposition party was arrested. “Those could be more lucky, complete coincidences for Modi, except for the fact that over the years, multiple politicians who opposed the BJP have found themselves facing charges of fraud or financial malfeasance, only for those charges to suddenly stall or be dropped when they switch parties and join the BJP instead,” Oliver said. “In general, to put it mildly: it is good to be on Modi’s good side, and very, very bad to be on his bad side.”

That’s particularly true for the nearly 200 million Muslims in India, as Modi espouses the once fringe idea of Hindu supremacy in India, leading to an increase in anti-Muslim violence and destruction of Muslim sites and property colloquially referred to as “bulldozer justice”.

“With anti-Muslim hate speech and violence on the rise, it is no wonder many are feeling increasingly targeted, in incredibly grim ways,” Oliver said before a clip of a police officer kicking Muslim men as they knelt in prayer; another officer was arrested for killing three Muslims on a train, and praising Modi while standing over their bodies. “It’s worth remembering: that is not a bug of Modi’s leadership, it is a feature,” Oliver noted.

Riaz Haq said...

John Oliver on Narendra Modi: ‘India seems to be sliding toward authoritarianism’

https://www.theguardian.com/tv-and-radio/article/2024/jun/03/john-oliver-narendra-modi-india


“But as an international community, it seems past time to stop the uncritical, fawning praise of a man who is, to put it mildly, a deeply complicated figure,” he concluded. “So maybe we could at least stop comparing him to Bruce Springsteen.”

“And when you talk about what he’s done for India, at least acknowledge that yes, he’s responsible for giving bags of grain to people, he’s also responsible for some getting sent bulldozers,” he added. “It should be possible to acknowledge the good things that Modi has managed to do for India, while also acknowledging that many Indians live in active fear of what he seems more than happy to represent.”


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John Oliver on Modi:


This video is banned in India. Please don’t share coz it will embarrass everyone from the govt to the Media


https://x.com/Azycontroll_/status/1797637824096936398

Vineeth said...

In any case, with the election results that are coming in, there are signs that Modi govt's authoritarian strain would be significantly weakened in Modi 3.0. For the first time in 10 years, Modi's BJP lacks the numbers needed for a majority in the lower house of the Parliament on its own and will need to depend on regional allies to survive and get bills passed. And those regional allies happen to be a cunning, demanding lot that can give him lot of headache. Habituated to ruling with brute majority as PM (and as CM of Gujarat previously), managing the expectations and demands of allies is going to be a whole new experience for him. Clearly Brand Modi seems to be losing its mojo among the electorate in the Hindi heartlands. The shocker was the drubbing BJP received in Uttar Pradesh state and in particular the Faizabad constituency where the new Ram temple built on the ruins of Babri Masjid is located. India is hopefully going to witness a return to an era of more moderate coalition politics for the next 5 years. One may dare hope that Modi might even end up having to put up a Vajpayee act. A welcome change indeed.

Vineeth said...

The Economist has an excellent article on Modi's unexpected electoral setback.

https://www.economist.com/asia/2024/06/04/a-shock-election-result-in-india-humbles-narendra-modi

For us here who are accostumed to seeing PM Modi the strongman push through his agenda with scant regard to any opposition (except in some rare cases like when he had to rollback a new farm law due to agitation by farmers), it would be interesting to see how he will handle the situation where he will need to take his regional allies on board for every policy and legislation.

Even though the final results aren't yet published, the fact that the opposition parties seem mostly happy with the results and has not yet made any accusations against the election commission of tampering with the results is a major relief as well. There was legitimate fear among some sections that Modi govt may try to rig the election in some manner if they sensed that election results would go against them.