By All Means Necessary (33 page)

6
. World Steel Association, “Annual Crude Steel Production, 1980–2010, ” accessed March 2013,
http://www.worldsteel.org/statistics/statistics-archive/annual-steel-archive.html
; World Aluminium, “Primary Aluminium Production, ” International Aluminium Institute, March 20, 2013,
http://www.world-aluminium.org/statistics/
; and Zhongkui Wang, “Current Situation of China's Nonferrous Metals Industry and Development Trend, ” UNCTAD Multi-Year Expert Meeting on Commodities and Development, March 20, 2013,
http://unctad.org/meetings/en/Presentation/SUC_MYEM2013_20032013_Zhongkui%20WANG.pdf
.

7
. Information Office of the State Council of the People's Republic of China, “China's Policy on Mineral Resources, ” White Paper, December 23, 2003.

8
. Ibid.

9
. U.S. EIA, “International Energy Statistics, ” accessed May 2013,
http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm
.

10
. Jeffrey D. Wilson,
Governing Global Production: Resource Networks in the Asia-Pacific Steel Industry
(electronically published, Palgrave Macmillan, 2013).

11
. “Thomson Reuters/Jefferies CRB Index, ”
http://www.jefferies.com/Commodities/2cc/389
.

12
. U.S. EIA, “Petroleum & Other Liquids: Spot Prices (Crude Oil in Dollars per Barrel, Products in Dollars per Gallon), ” release date February 27, 2013,
http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm
.

13
. U.S. Geological Survey, “Copper, ” Mineral Commodity Summaries, January 2003,
http://minerals.usgs.gov/minerals/pubs/commodity/copper/240303.pdf
; and U.S. Geological Survey, “Copper, ” Mineral Commodity Summaries, January 2009,
http://minerals.usgs.gov/minerals/pubs/commodity/copper/mcs-2009-coppe.pdf
.

14
. U.S. Department of Agriculture, “Economics, Statistics and Market Information System (ESMIS): National Agricultural Statistics Service, ”
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1002
. Wheat prices are more heterogeneous, so the multiple will depend on the type of wheat in question.

15
. Jim Lennon, “Base Metals Outlook: Drivers on the Supply and Demand Side, ” February 2012,
http://www.macquarie.com/dafiles/Internet/mgl/msg/iConference/documents/18_JimLennon_Presentation.pdf
.

16
. Based on Food and Agriculture Organization of the United Nations, “FAOSTAT, ”
http://faostat3.fao.org/home/index.html
; and U.S. EIA, “International Energy Statistics: Total Petroleum, ”
http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=5&pid=5&aid=2&cid=regions,&syid=2007&eyid=2011&unit=TBPD
.

17
. For example, Dambisa Moyo, “The Resource Shortage Is Real, ”
Time
, June 8, 2012; and Jeremy Grantham, “Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever, ” GMO Quarterly Letter, April 2011,
http://www.theravinaproject.org/JGLetterALL_1Q11.pdf
.

18
. BP,
Statistical Review of World Energy June 2012
(London: BP, 2012).

19
. U.S. EIA,
International Energy Outlook 2000
(Washington, DC: U.S. Department of Energy, 2000).

20
. Blake Clayton,
Panic: A Century of Oil Market Madness
(Oxford University Press, forthcoming).

21
. See David G. Victor, David R. Hults, and Mark C. Thurber (eds.),
Oil and Governance: State-Owned Enterprises and the World Energy Supply
(Cambridge: Cambridge University Press, 2012). Even governments that allow private resource development can fall prey to the same dynamic if they depend on resource revenues for their budgets. Rising resource prices can reduce their need to open more land, or tempt them to raise taxes and other levies on production. These sorts of steps deter investment and curb the tendency of production to rise with price.

22
. Dmitry Zhdannikov and Claire Milhench, “Oil Bull Goldman Sees End to Rising Prices, ”
Reuters,
October 18, 2012.

23
. Kenneth B. Medlock III, “U.S. LNG Exports: Truth and Consequence, ” Rice University, August 10, 2012. “The average cost of shipping U.S. natural gas to Japan will be $9.05 from 2011 to 2020, assuming a U.S. price of $3.98, leaving a loss of 96 per million Btu taking into account the costs of transportation and liquefaction, the study shows.” As reported in Matthew Brown, “U.S. LNG Profit Seen Elusive as Price Gap Closes: Energy Markets, ”
Bloomberg News
, January 11, 2013.

24
. Metal Bulletin, “Metal Bulletin Copper High-Grade Cathode Spot Price, ” Bloomberg, accessed April 4, 2013.

25
. Ross Garnaut, “The Contemporary China Resources Boom, ”
Australian Journal of Agricultural and Resource Economics
56, no. 2 (2012). The capital cost of bringing the average new mine into production has reportedly more than doubled since 2000 (on a per-ton basis), with costs for marginal mines (which ultimately set prices) rising even more strongly.

26
. For example, Ernst & Young, “Business Risks Facing Mining and Metals 2012–2013, ” accessed May 5, 2013,
www.ey.com/Publication/vwLUAssets/Business-risk-facing-mining-and-metals-2012-2013/$FILE/Business-risk-facing-mining-and-metals-2012-2013.pdf
.

27
. U.S. Geological Survey, “Historical Statistics for Mineral and Material Commodities, ” accessed April 3, 2013,
http://minerals.usgs.gov/ds/2005/140/
.

28
. Stuart Burns, “Bauxite and Alumina Moving Rapidly to Spot Pricing, ” MetalMiner, August 16, 2010,
http://agmetalminer.com/2010/08/16/bauxite-and-alumina-moving-rapidly-to-spot-pricing/
.

29
. For drivers of bauxite demand growth, see World Bank, “Prospects for Commodity Markets, ” Global Economic Prospects,
Commodity Annex, June 2012,
http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1304428586133/GEP2012b_Commoditiy_Appendix.pdf
.

30
. See Yongzhen Yu,
Identifying the Linkages Between Major Mining Commodity Prices and China's Economic Growth—Implications for Latin America
, IMF Working Paper WP/11/86, April 2011,
http://www.imf.org/external/pubs/ft/wp/2011/wp1186.pdf
; “New Shape for the Bauxite and Alumina Industry, ”
Reuters,
Roskill Information Services Press Release, January 21, 2013,
http://www.reuters.com/article/2013/01/21/idUSnPreqy79pa+100+PRN20130121
; and “China's Transformation of the Aluminum Industry, ” FNArena News, April 18, 2013,
http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=0FF5247F-A8B1-B36B-29EA5C0B50749D0E
.

31
. Jenifer Piesse and Colin Thirtle, “Three Bubbles and a Panic: An Explanatory Review of Recent Food Commodity Price Events, ”
Food Policy
34, no. 2 (2009).

32
. “U.S. Department of Agriculture; World Bureau of Metal Statistics; British Petroleum; and IMF staff.” As cited in Thomas Hebling, Valerie Mercer-Blackman, and Kevin Cheng, “Riding a Wave: Commodities Boom, ”
Finance & Development
45, no. 1 (March 2008). See also Bryan Lohmar and Fred Gale, “Who Will China Feed?”
Amber Waves
6, no. 3 (June 2008).

33
. The U.S. Department of Agriculture, for example, sees Chinese demand for imported wheat as relatively stable over the next decade; juxtaposed with rising demand elsewhere, particularly in the Middle East and Africa, the result is a declining Chinese share in global trade. U.S. Department of Agriculture Economic Research Service, “USDA Wheat Baseline, 2012–21, ” November 20, 2012, accessed September 5, 2013,
http://web.archive.org/web/20130223212408/
http://@ers.usda.gov/topics/crops/wheat/usda-wheat-baseline,-2012-21.aspx
. Only Chinese demand for oilseeds—primarily soybeans used as animal feed—occupies a large share of projected global growth in the FAO-OECD estimates, contributing about a quarter of the global increase through 2021. Food and Agriculture Organization of the United Nations,
OECD-FAO Agricultural Outlook
, 18th ed. (OECD Publishing and FAO, June 2012).

34
. Information Office of the State Council of the People's Republic of China, “The Grain Issue in China, ” 1996.

35
. Ibid.

36
. “China Pledges More Efforts to Stabilize Prices, ”
ChinaView
, November 14, 2007,
http://news.xinhuanet.com/english/2007-11/14/content_7074656.htm
.

37
. “Interview with Han Changfu, Minister of Agriculture, ”
Study Times
, June 1, 2011,
http://www.rweek.cn/Weeklyx.asp?id=1490
. In Chinese.

38
. Ibid.

39
. Information Office of the State Council of the People's Republic of China, “The Grain Issue in China, ” 1996.

40
. National Bureau of Statistics of China, “China Statistical Yearbook 2011, ”
http://www.stats.gov.cn/tjsj/ndsj/2011/indexeh.htm
.

41
. Soybeans are used largely as an animal feed, which partly shields final consumers from the price volatility that comes with exposure to global markets, potentially making import dependence more politically palatable to Chinese leaders.

42
. All agricultural production shares a common set of scarce inputs; land drawn into soybean production, for example, is land that cannot be used to produce wheat, with the result of higher wheat prices even if China does not import any wheat. See C. Peter Timmer,
Causes of High Food Prices
, ADB Economics Working Paper Series no. 128 (Manila: Asian Development Bank, 2008). Fertilizer and machinery are also common inputs that help keep prices for various agricultural commodities moving together. Food prices also tend to move together because many agricultural commodities are substitutes; when the price of wheat rises, for example, many people shift consumption to corn, driving up its price too.

43
. This is not to suggest that this outcome is likely; some analysts have actually argued that productivity gains herald decreasing land use for agriculture. See Jesse H. Ausubel, Iddo K. Wernick, and Paul E. Waggoner, “Peak Farmland and the Prospect for Land Sparing, ”
Population and Development Review
38, supplement S1 (February 2013).

44
. U.S. Bureau of Economic Analysis, “Table 1.1.10. Percentage Shares of Gross Domestic Product, ” National Income and Product Accounts Tables, last revised July 31, 2013,
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&903=14
.

45
. Eurasia Group,
China's Great Rebalancing Act
(New York: Eurasia Group, 2011), 2.

46
. “Exports of Goods and Services (% of GDP), ” World Bank, accessed August 2013,
http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS
.

47
. “China Exports Account for 11.1% of World Trade, ”
Xinhua
, December 27, 2012,
http://english.peopledaily.com.cn/90778/8072157.html
.

48
. “Household Final Consumption Expenditure, etc. (% of GDP), ” World Bank, accessed September 6, 2013,
http://data.worldbank.org/indicator/NE.CON.PETC.ZS
.

49
. Ma Kai, “The 11th Five-Year Plan: Targets, Paths and Policy Orientation, ” Gov.cn, March 19, 2006,
http://english.gov.cn/2006-03/23/content_234832.htm
.

50
. NPC & CPPCC National Committee Annual Sessions 2006, “Facts and Figures: China's Main Targets for 2006–2010, ” March 6, 2006,
http://english.gov.cn/2006-03/06/content_219504.htm
.

51
. Calla Wiemer, “China's Worsening Imbalances, ”
Wall Street Journal
, April 11, 2012; Chetan Ahya, Derrick Y. Kam, and Jenny Zheng, “Asia Insight: Why China Needs Consumption and India Needs Investment, ”Asia/Pacific, Morgan Stanley Research, October 28, 2011; Victoria Ruan, “S&P Sounds Alarm on China's Overinvestment, ”
South China Morning Post
, February 1, 2013; and “Free Exchange: Capital Controversy, ”
Economist
, April 14, 2012.

52
. Steven S. Roach,
China's 12th Five-Year Plan: Strategies vs. Tactics
(New York: Morgan Stanley, 2011), 2.

53
. Edward L. Morse, Heath R. Jansen, Daniel P. Ahn, Jon Bergtheil, Aakash Doshi, Viswanathrao Kintali, Seth Kleinman, Eric G. Lee, Ulhas Shenoy, Johann Steyn, David B. Wilson, and Anthony Yuen, “The New Abnormal: 2013 Commodities Outlook, ”
Commodities Strategy
, Citi Research, November 19, 2012, 9.

54
. Yongzhen Yu,
Identifying the Linkages Between Major Mining Commodity Prices and China's Economic Growth-Implications for Latin America
, IMF Working Paper (Washington, DC: International Monetary Fund, 2011), 22.

55
. Ibid.

56
. Ibid., 23.

57
. Richard Dobbs et al.,
Resource Revolution: Meeting the World's Energy, Materials, Food, and Water Needs
(McKinsey Global Institute, November 2011); and authors' calculations.

58
. Marina Fischer-Kowalski et al.,
Decoupling Natural Resource Use and Environmental Impacts from Economic Growth
, report of the Working Group on Decoupling to the International Resource Panel (United Nations Environment Programme, 2011).

59
. R. Glenn Hubbard and Robert J. Weiner, “Long Term Contracting and Multiple Price Systems, ” NBER Working Paper No. 3782 (1991).

60
. They also control roughly 35 percent of global production.

61
. Tarun Khanna, Aldo Musacchio, and Ricardo Reisen de Pinho, “Vale: Global Expansion in the Challenging World of Mining, ” Harvard Business School Case Study, October 14, 2010, 10.

62
. Ibid.

63
. Samir Singh, David Hoyt, and Hau Lee, “Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, ” Stanford Graduate School of Business: Global Supply Chain Management Forum, July 3, 2007,
https://gsbapps.stanford.edu/cases/documents/gs56riotinto070307.pdf
.