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Opportunities for China and India to invest in Africa’s heavy haul railways
Dirk Kotze, Director and General Manager: Africa, from The Beijing Axis has presented at the Heavy Haul Rail Africa. If you would like more information about the conference, please visit the website: www.railconferences.com/heavyhaulrail/africa
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The Beijing Axis⎥ 1
Disclaimer
This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing Axis cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. The Beijing Axis, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own independent judgement with respect to any matter contained in this document.
The Beijing Axis⎥ 2
The Beijing Axis’ Knowledge & Network Synergies
Beijing Axis Commodities
• Commodity Marketing • Commodity Procurement
Beijing Axis Capital
• Transaction Origination • Corporate Finance
Advisory
Beijing Axis Procurement • Comprehensive
Procurement Solutions
Beijing Axis Strategy
• Strategy Formulation • Strategy Implementation
Founded in 2002; has successfully worked with many international and Chinese MNCs
Operates in four synergistic cross-border China businesses
Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL ENGINEERING and OTHER SERVICES sectors
Provides solutions to international firms as they act in unfamiliar territory in China/Asia
Provides solutions to Chinese/Asian firms as they venture out and ‘go global’
The Beijing Axis⎥ 3 The Beijing Axis⎥ 3
Agenda
1. Background to Chinese Rail Projects in Africa
2. The Chinese Rail Industry
3. Challenges
4. A Note on India in Africa
The Beijing Axis⎥ 4
China’s Share of Global GDP and Consumption of Selected Commodities (% 1990, 2000, 2010)
China has dramatically increased its share of world consumption of key metals and minerals over the past two decades. The drivers of this trend remain intact
4% 17% 41%
0%
50%
100%
1990 2000 2010
ROW China
14% 18% 45%
0%
50%
100%
1990 2000 2010
ROW China
7% 22% 47%
0%
50%
100%
1990 2000 2010
ROW China
Primary Aluminium Steel Coal
2% 4% 10% 0%
50%
100%
1990 2000 2010
ROW China GDP
4% 13% 32%
0%
50%
100%
1990 2000 2010
ROW* China Refined Nickel
13% 17% 33% 0%
50%
100%
1990 2000 2010
ROW China
4% 12% 38%
0%
50%
100%
1990 2000 2010
ROW China Chrome Ore Refined Copper
8% 20% 41%
0%
50%
100%
1990 2000 2010
ROW China Refined Zinc
*Note: ROW stands for Rest of World Source: World Bank; CNBS; CEIC; The Beijing Axis Analysis
The Beijing Axis⎥ 5
China’s steel consumption is poised for more moderate but sustained growth and the base effect matters
Steel Intensity Comparison of Top 30 Economies(1) and Other Selected Asian Economies (2010)
*Note: (1)Switzerland, Norway and Sweden are not included for comparison purposes (2) China in the year 2000 Source: IMF; World Steel Association; The Beijing Axis Analysis
0
200
400
600
800
1,000
1,200
0 10,000 20,000 30,000 40,000 50,000 60,000
Steel Consumption Per Capita (USD, 2010)
GDP Per Capita (USD, 2010)
Emerging Economies except China Mainland China
Developed Economies
Bubble Size: GDP CAGR (2000-2010)
Russia
Brazil
South Africa
Japan
US
Germany
France UK
Italy
Spain
Mexico
Australia
Sweden Netherlands
Canada Austria
Belgium
Saudi Arabia
India
Indonesia
Iran
Thailand
China
Poland
Argentina Venezuela
With less infrastructure construction, developed economies have lower demand for finished steel
The trend line is indicative of the general pattern in steel consumption at different stages of industrialisation
Steel consumption declines after GDP per capita reaches USD 25,000
Developing economies consume less steel per capita, but their relatively large populations ensure years of steady demand growth
Malaysia
Philippines Vietnam
S. Korea
Turkey
China(2)
China in 2000
35.1
2005 2006 2007 2008 2009 2010 2011
USD1bn
China’s imports of selected commodities from Africa (USD bn, 1995-2008)
CAGR 1995-2008
0%
20%
40%
60%
80%
100%
0% 20% 40% 60% 80% 100% 120% 140%
China’s imports from Africa as a % of total imports
Cobalt
Ferroalloys
Nickel
Petroleum Gases
Electronics Steel
Platinum
Crude Oil
Copper
Chromium
Manganese
Diamonds
Iron Ore Wood
Tobacco
Cotton
- High growth rate - Low quantity
- High growth rate - High quantity
Note: Bubble size is based on the commodity’s share of China total commodity imports from Africa in 2008 Source: UN Statistical Database; The Beijing Axis Analysis
China 37%
Italy 15%
France 10%
USA 8%
Turkey 5%
All Others 25%
Share of all contract revenue in Africa (2009)
Middle East 16.6%
North America 0.4%
Africa 41.1% Europe
3.2%
Asia 36.0%
South America 2.7%
Breakdown of China’s international contract revenue (2009)
Source: ENR; The Beijing Axis Analysis
The Beijing Axis⎥ 9 The Beijing Axis⎥ 9
Agenda
1. Background to Chinese Rail Projects in Africa
2. The Chinese Rail Industry
3. Challenges
4. A Note on India in Africa
THE CHINESE PARTS AND EQUIPMENT MARKET The railway industry can be divided into 3 sub-sectors: Infrastructure, Vehicle/Components and Services