Time To Invest With The Ants

Buying resources makes perfect sense if you have even a broad idea of the resource crisis that’s approaching. The problems we have today may seem big, but at least they can be solved by money. The coming resource shortage cannot. China’s method of using money to accumulate resources is now one of a few possible answers. As the fable goes, they are the ants, and we unfortunately are the grasshoppers.

Why does China want so much iron ore? As we showed in a recent issue of TCI, there has been a massive spike in demand for iron in China. China’s stimulus campaign seems to be working.

Infrastructure projects are booming. Auto sales in China now surpass those in the US, even though the number of Chinese people owning cars is only about 30 per thousand versus 800 per thousand here. Car ownership in China has a lot of room to grow. And those cars must be made of steel.

Meanwhile, China also has the problem of needing more energy. There’s only so much oil in the world to fuel all those new cars. T. Boone Pickens, among others, thinks the world hit Peak Oil production last year (at 85 million barrels per day). Sometime next year, as US oil demand starts rising along with the rest of the world, we will be in real trouble.

Of course, there’s one area where not even China is looking far enough ahead…

The world today has dropped the ball regarding our eventual need for alternative energy. Wind remains the cheapest and easiest alternative energy source, but building enough windmills to meet our energy needs may take more steel than can be produced at a reasonable cost in the future. And we’re barely making an effort now. China may be accumulating iron ore with this problem in mind, but we cannot say for certain.

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