You know the stat: over the past three decades, China has consumed as much concrete every two years as the US did in the whole of the 20th century.1 In any given year, the country consumes half to two thirds of many of the world’s industrial commodities, from copper to steel to lithium to zinc.
Now imagine if India did too. It’s not just a thought experiment – India took the mantle of the world’s most populous nation from China in 2023 and, after decades of stalling, is finally making good on economists’ expectations of development. In terms of purchasing power, it currently stands roughly where China did in the early 2000s.2 If it follows the same path, its GDP in dollar terms will expand by 10 times over the next two decades.
The graphic below shows the commodities needed for that development at a projected peak later this century: 1 billion tonnes of extra steel annually, 18.5 million tonnes of copper, 33 million tonnes of aluminium. To put it in perspective, that’s anything from half to three quarters of the current global output of each resource.
Source: Macquarie, Bloomberg, Fidelity International, August 2024. Numbers project India's potential peak use of commodities later this century in the absence of any limitations on supply. Some have been rounded for the sake of presentation.
So what to do? The only answer is technology. For environmental, cost, and availability reasons, India must at some point use different solutions to China, ones that are less resource-heavy and cheaper. Determining which solutions the country is likely to opt for would be advantageous for investors. And there are some educated guesses to be made.
In the late 1990s, China officially became the world’s biggest consumer of copper as it went about wiring a gigantic expansion of its electricity network. From 20 per cent of global demand in the nineties, China now accounts for more than half of the world’s copper consumption. The Chinese state grid is the metal’s biggest customer and Beijing is investing around $100bn annually in the network compared to the $3.5bn India will spend on average over the next six years.
That obviously points to a gigantic ramp up in investment and a need for copper – but there will have to be alternatives. For instance, India could partly replace copper with aluminium in some of its network.
The scale of expansion will be similar in other areas too. There might be enough iron ore to meet India’s projected steel needs, but the use of coking coal is a bigger problem both environmentally and in terms of availability.
Bottlenecks will appear, be it in the needs of the transition or the country’s broader path to higher incomes and living standards. India should be able to make the necessary investments in its infrastructure over the next decade without running into significant difficulties, but for businesses, markets, and government, the challenges will become more apparent. There is a reason why Elon Musk is striving to reduce the quantity of copper in his cars. Both India and the sectors it will rely on for development will have to innovate just as hard and as successfully as Tesla.
1 China uses as much cement in two years as the US did over the entire 20th century | Sustainability by numbers
2 According to data from Trading Economics
