Mick Davis was the CEO of mining company Xstrata, which merged with Glencore in 2013. He is now CEO of a new company, X2 Resources. For services to Holocaust Commemoration and Education, he was knighted as part of 2015 Queen’s Birthday Honours.
Q: Which emerging markets are you most optimistic about?
A: Well, I think emerging markets are generally not in great shape, for a whole range of reasons. This is partly because they are experiencing a decline of their large export markets, as world growth has not been stellar.
Clearly the most dominant emerging market, China, is going through a very important structural adjustment that is impacting its growth rates and is compounded by the anti-corruption drive, which I think is stultifying economic activity in that country.
I think China has a process to go through which is potentially quite painful. I don’t think they will have a hard landing, but nevertheless it is quite complex. India, which has huge potential, needs to have a huge amount of infrastructure investment to realise its potential.
It has massive problems realising that potential because of the Byzantine nature of the political structures there, but given the demographics of its young, integrated workforce, India could do very well. South Africa and Nigeria are not in good shape at the moment, and I don’t see those circumstances changing for the better anytime soon.
And Brazil is also struggling, so it’s difficult to construct a positive story around emerging markets at the moment, but the one I think has the greatest inherent potential is India.
Q: In your opinion, are the declining commodity prices demand driven, or are they a result of speculation?
A: No, I think it’s not a result of speculation. Speculation simply changes the level of volatility within a cycle, it doesn’t actually determine a trend, and so you can have a lot of volatility because of speculation and this might amplify different pricing trends.
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