More on the Silk Road boom

Advertisement

From Barclays on the Silk Road (One Belt, One Road or Yi Dai Yi Lu):

We estimate that YDYL projects would absorb some of the overcapacity in Chinese industries such as cement, steel and aluminium, even under conservative assumptions. If we envisage a scenario assuming that roads, railway, power generation and power distribution assets grow by 5% from their existing asset base among YDYL countries, this could create 137mt of steel demand based on the existing asset base. This represents around 14% of China’s total steel production capacity as of 2014. Such a boost to demand could effectively give back steel producers in China pricing power, as the industry would go from 22% oversupplied to 8%, based on our estimates.

SilkRoadDemandByType

Colour me skeptical but estimating a 5% jump in capital stock in 60 countries simultaneously is the polar opposite of conservative.

Advertisement
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.