In the near term, the world economy is expected to strengthen in 2014 and 2015 as it continues to emerge from the challenges of the global financial crisis. China should continue to grow by around 7% and the diminishing effects of fiscal tightening should support a firmer recovery in the US and beyond.
In the medium term, the US, Europe and Japan should experience a normalisation of their underlying economic growth rates as the impact of the financial crisis fades. A successful reform programme in China should lay the foundations for more sustainable growth. Looking beyond the short-term hiatus in emerging markets, we expect continuing robust growth in the medium to longer term as they benefit from continued convergence of living standards.
In China and other emerging economies, there remains significant potential for further urbanisation and industrialisation to support robust growth and demand for key commodities, including crude steel (iron ore, and metallurgical coal), copper, nickel and thermal coal. The emergence of the expanding middle class will support rising intensity of consumption for the later cycle products in Anglo American’s portfolio – PGMs and diamonds – and will also benefit the phosphates business.
Supply growth in the near to medium term poses challenges to the prices of some global commodities, most notably iron ore and copper. However, in the long term, prices for Anglo American’s products are expected to be supported by supply constraints in many jurisdictions and the challenges producers face in bringing new supply into production. Economic uncertainty, as we are seeing currently, tends to restrain new supply; in the longer term Anglo American therefore expects to see tightening market fundamentals and a recovery in price performance.