Consumption: Broadening of the Middle Income Base

Middle income demand for commodities in the metals and mining sector, the products of the metal and mining sector, is more volume metric and it is less price or financial in terms of its form than what we see in the higher income countries. If we wind the clock back 40 years ago, 1981, the world had or saw approximately 1.1 billion people in middle income. Those 1.1 billion people, on average, earned a gross national income, per capita, of around $4,000 U.S. dollars. And you can see you know Mexico, Brazil, Nigeria, Indonesia formed middle income, upper middle income, and lower middle income, which is fairly balanced, about half and half, across that 1.1 billion people. And the world had just come off a massive investment boom in the 70s and we had enough metal in mind material to supply that part of the market without a problem.

Fast forward 20 years to 2001, 20 years ago, we tripled the number of people in middle income and we doubled gross national income, per capita. That was driven largely by China stepping up into lower middle income. They stepped up from a largely agrarian rule, subsistence lifestyle, but started moving into cities. The great urbanization wave that drove the rise of China had definitely started by 2001.

So, I’ll Fast forward to today or the full year of 2021, the latest year that I can get good data for. In 2022, we’re not at the end of the year yet. So, we doubled the number of people in middle income, again. We went from 3 to close to 6 billion people in middle income and we raised incomes across middle income for 6 billion people by a 50% rise, in U.S. dollar terms, to close to $12,000. And really, what’s extraordinary is when you look at commodity demand, it is the 6 billion people in middle income that are buying new cars, new washing machines, new iPhones, incredibly volumetric and metals intensive, and that’s the environment that we need to supply into. That’s where the capital that we’re investing in our sector goes. It’s bettering people’s lives and it’s providing modern convenience and better lifestyles for 6-7 billion people on the planet today.

What I’ve done is I’m stratifying middle income, and then I’m further stratifying people aged 20 to 60 which are really the commodity consumptive prime of life. In your early 20s and 30s, that’s household formation. That’s when you buy a car. That’s when you buy a house. It’s when you buy your first washing machine, whatever that might be. And really, that rise in middle income, and these are global numbers that I’m sharing with you guys, 20 years ago today and 20 years projected. (And yes, 2041 is a projection based on World Bank data). What’s encouraging from a demand perspective is you can see the broadening of the base. We’ve got another 70s wave of people hitting middle income, and that’s going to drive more commodity consumption go forward.