BRICS: An Emerging Commodity Coalition here to stay

by: Casper Burgering , Marijke Zewuster , Arjen van Dijkhuizen , Georgette Boele , Hans van Cleef , Nora Neuteboom

In this publication: The BRICS are economic out performers, but not all. The growth of commodity demand from China and India will provide a solid base for years to come. We think that these countries will remain future economic and commodity heavyweights.

BRICS-An_Emerging_Commodity_Coalition_11-2019.pdf (5 MB)
Download

Please note that due to the size of the document and the limitations of this site, that some figures are low in quality. If you want to receive a version with higher quality graphs, please send a mail to casper.burgering@nl.abnamro.com

The BRICS (an acronym for emerging markets Brazil, Russia, India, China and South Africa) have evolved to economic and commodity heavyweights over the last decades. We think that this will not change in the decade to come. The countries will remain important drivers for the global economy and for many commodity markets in the years ahead.

Currently, the combined BRICS share in de global economy adds up to 22% and more than 40% of total commodity supply and demand originates from these countries.

Economic out performers, but not all

From a macro-economic perspective, the concept of the BRICS has lost some, but not all of its relevance. After almost 20 years of BRICS, we can conclude that only China and India have succeeded in structurally outperforming the advanced economies. China has transformed into a key engine of global growth. The country has moved up the value chain and is the most creditworthy amongst the BRICS. India is in a strong position to regain the status of fastest growing giant. The country is likely to reach the top three of largest economies by 2025. Meanwhile, the commodity producers Brazil, Russia and South Africa have not succeeded in structurally outperforming the advanced economies. We do, however, expect a pick-up in growth for these countries, but not to levels similar to China and India.

Solid base for commodities demand

For the long term, the Belt & Road-initiative by China – which focuses on connectivity and cooperation between Eurasian countries – will provide a solid base for commodities demand. Next to that, further global electrification, urbanisation, higher infrastructural & construction spending and also the strengthening growth of the middle class will secure a continuation of the BRICS’ commodities hunger in the next decade. Furthermore, the commodity complex is also subject to structural change. That is mainly because modernisation of commodity industries (refining, mining) and an increase of mergers and acquisitions will increase in the years ahead. But commodity challenges for BRICS must also be faced. The most important challenge is addressing sustainability in relation to commodity markets. Outdated technology, low R&D investments and relative loose sustainability policies will keep the environmental concerns elevated in the years ahead. More stringent policies on this matter by BRICS are therefore a necessity.

BRICS remain future economic and commodity heavyweights

The combined share of the BRICS in the global economy has more than doubled since 1990. Although this rising share is fully attributable to China, we expect the BRICS’ share to rise further in the next decade. That said, China and especially India will continue to leave their mark on the global economy and on commodity markets. China will remain an important stakeholder and front runner in the global climate debate. The country is not only a big polluter but also a big investor in clean energy. As China will continue to slow as its economy matures. As a result, investor focus will turn more and more on India in the coming decade.

All-in-all, we believe that the BRICS will remain an emerging commodity coalition for many years to come.