From Boomers to Zoomers; How demographics drive
After WWII, Western birth rates skyrocketed, which had far-reaching effects on the worldwide demand for commodities. The birth rate skyrocketed when returning troops started having children, and the size of this “baby boom” generation peaked in the mid-1950s. The population boom overnight changed consumer preferences. Families needed a lot of new furniture, electronics, food, clothes, and other necessities to accommodate their growing broods. To meet the skyrocketing demand, manufacturers across all sectors increased output. Steel for building, oil to power growing economies, and basic metals and chemicals for industrial use all saw significant increases. Commodity markets throughout the world were affected for decades by this sudden population transition.
The story symbolises how population dynamics represent a key driver of global commodity demand. The rising need for food, energy, metals, and other resources is predictable given the United Nations’ projection that the global population will approach 10 billion by 2050. Demand profiles between groups also change as a result of factors such as ageing, urbanisation rates, and geographic movements.
Population Growth and Agricultural Commodities;
With a growing population comes increased demand for food crops and other agricultural products. Staple foods like wheat, rice, and maize will remain in high demand as the world’s population continues to grow. Increased demand for meat and dairy products is a direct result of rising urbanisation and shifting dietary choices, which in turn fuels increased demand for animal feed commodities like corn and soybeans. The population’s dispersion across the country is also crucial. Construction resources like cement, steel, and copper are in high demand due to the increasing number of buildings being built in rising nations. Commodity prices are supported by rising demand for consumer goods and technology as cities grow and more people enter the middle class.
Ageing Populations and Energy Commodities;
Population ageing in Europe, North America, and East Asia is expected to reduce household energy demand worldwide by 6% between 2020 and 2040, according to the International Energy Agency. However, demand will increase by 25% in the commercial sector, where healthcare is a significant end user. According to projections from the World Health Organisation, international spending on healthcare would have more than doubled from $5.1 trillion in 2000 to $10.5 trillion in 2020. During those 20 years, global expenditure increased by nearly 100%, as seen above.
Meanwhile, in emerging countries, we will see opposing patterns. According to UN forecasts, Africa and India would account for more than half of global population increase between now and 2050. World Bank statistics reveal energy usage per capita in lower-income nations is still just a fourth of higher-income counterparts, so as urbanisation brings hundreds of millions more into cities, their transport and building energy demands will skyrocket.
Urbanisation and Metals;
According to UN projections, by 2050, over 70% of the world’s population would live in urban areas, up from 56% in 2020. Already, 80 percent of global GDP and 80 percent of world energy consumption occur in metropolitan areas. Brookings Institute researchers looked at UN and World Bank data from the past and found that for low-income countries, every percentage point increase in urbanisation was associated with an increase of 0.7% to 1.3% in infrastructure expenditure.
Aluminium consumption in China surged by more than 25-fold from 1950 to 1990, mirroring the country’s rapid urbanisation from 10% to 30% during that time period. More than half of the global population is expected to live in urban areas by 2050, meaning that infrastructure demands will consistently maintain metal demand for decades.
Demographics and Precious Metals
According to the data compiled by the World Gold Council, jewellery and investment accounted for more than 80% of worldwide gold demand in 2022. Allianz Global polls reveal that retirees invest a disproportionate amount of their wealth in gold in Europe and the United States.
Meanwhile, millennials make up a sizable portion of the cryptocurrency investment base; a 2022 Gemini study indicated that more than half of American crypto owners were between the ages of 18 and 38. According to CoinMarketCap, the total market capitalization of all cryptocurrencies has increased dramatically from $14 billion in 2016. This trend implies that digital assets are becoming more popular among younger generations than gold.
The effects of shifting demographics are felt widely but develop over time. Capital expenditure cycles can last for decades, therefore manufacturers need to be able to see what consumers will be buying in the future. Population and socioeconomic linkages should be taken into account by policymakers when striking a balance between resource availability and environmental preservation. Moreover, demography provides distinctive insight into lasting commodities investing themes at a time when diverse investors are seeking to link portfolios with macro undercurrents. Future resilience against unanticipated shifts in this continuously shifting context may be bolstered by incorporating rigorous population modelling into strategic decision-making.
Mihir Mahagaonkar – Junior Analyst, STN
Ashley, J. and Gambarini, S. (2023). DEMOGRAPHICS: THE GOOD, THE BAD, AND THE UGLY. [online] Goldman Sachs. Available at: https://www.gsam.com/content/gsam/us/en/institutions/market-insights/gsam-insights/perspectives/2023/demographics.html .
Bloom, D. (2020). Changing Demographics and Economic Growth – IMF F&D. [online] IMF. Available at: https://www.imf.org/EN/PUBLICATIONS/FANDD/ISSUES/2020/03/CHANGING-DEMOGRAPHICS-AND-ECONOMIC-GROWTH-BLOOM .
ch.allianzgi.com. (n.d.). 2022 outlook. [online] Available at: https://ch.allianzgi.com/en-gb/en-insights/market-updates/2022-outlook [Accessed 23 Sep. 2023].
Clark Annez, P. and Linn, J. (2010). An Agenda for Research on Urbanization in Developing Countries. [online] Brookings. Available at: https://www.brookings.edu/articles/an-agenda-for-research-on-urbanization-in-developing-countries/ [Accessed 23 Sep. 2023].
CoinMarketCap. (n.d.). Check Cryptocurrency Price History For The Top Coins. [online] Available at: https://coinmarketcap.com/historical/ .
Conte, N. (2021). Visualizing 50 Years of Global Steel Production. [online] Visual Capitalist. Available at: https://www.visualcapitalist.com/visualizing-50-years-of-global-steel-production/ .
Gemini. (n.d.). Crypto Research Reports | Gemini. [online] Available at: https://www.gemini.com/state-of-crypto .
Gordon, M. and Weber, M. (2021). Global energy demand to grow 47% by 2050, with oil still top source: US EIA. [online] www.spglobal.com. Available at: https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/100621-global-energy-demand-to-grow-47-by-2050-with-oil-still-top-source-us-eia .
Ianchovichina , E., Jedwab, R. and Haslop, F. (2022). Are cities engines of production or consumption, and does it matter? [online] Brookings. Available at: https://www.brookings.edu/articles/1622441/ [Accessed 23 Sep. 2023].
Routley, N. (2022). Visualized: The World’s Population at 8 Billion. [online] Visual Capitalist. Available at: https://www.visualcapitalist.com/visualized-the-worlds-population-at-8-billion/ .
SPECIAL FOCUS Urbanization and commodity demand. (n.d.). Available at: https://openknowledge.worldbank.org/server/api/core/bitstreams/90c7f8d1-7d60-56f6-8475-59ed8b34a5f7/content .
The circular economy: Moving from theory to practice McKinsey Center for Business and Environment Special edition. (2016). Available at: https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/Sustainability/Our%20Insights/The%20circular%20economy%20Moving%20from%20theory%20to%20practice/The%20circular%20economy%20Moving%20from%20theory%20to%20practice.pdf .
Umberger, W. (2015). Demographic Trends: Implications for Future Food Demand. [online] Available at: https://www.kansascityfed.org/documents/7023/umberger-paper.pdf .
World Gold Council. (n.d.). Gold Demand Trends Full Year 2022. [online] Available at: https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2022 .
www.schroders.com. (2023). Investor Download: Commodities in the age of the 3D reset. [online] Available at: https://www.schroders.com/en/global/individual/insights/podcast-commodities-in-the-age-of-the-3d-reset/ [Accessed 23 Sep. 2023].
www.un.org. (n.d.). World Population Prospects 2019 | Population Division. [online] Available at: https://www.un.org/development/desa/pd/news/world-population-prospects-2019-0 .