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Chinese, Japanese miners to benefit from US$26T Asian infrastructure drive

Miners in China and Japan are well positioned to acquire assets across Asia as a perk of their respective countries funding infrastructure development across the region, according to panelists at the Mining Investment Asia conference in Singapore on March 30.

Emerging countries in Asia are expected to spend about US$26 trillion on infrastructure over the next 15 years, averaging more than US$1.7 trillion each year, according to Edward Gustely, managing director of Penida Capital, citing forecasts from the Asian Development Bank.

"The problem is that these governments don't have the capability to finance these projects on their own," Gustely told S&P Global Market Intelligence on the sidelines of the conference.

Gustely added that institutional investors such as pension funds will also not be available to back these projects, as they usually participate only after construction is complete.

"China and Japan are the only two players in the region who have the ability to fill in the mismatch," he said.

Gustely said Chinese and Japanese governments may extend soft lending, or government loans with low interest rates, to other Asian nations in exchange for contractor deals.

The two countries will also be in a favorable position to secure mining assets in the region, Gustely said.

Marco Roque, associate director with mining investment firm Emerging Markets Capital, said during the panel discussion that infrastructure plans in Asia will be a major driver for commodities demand.

"The U.S. and Europe have the desire for infrastructure stimulus, but they might not be able to do so from a fiscal perspective," Roque said.

Roque said China has the ability and desire to pour investments into infrastructure construction along with its One Belt, One Road initiative, especially when growth in domestic investments is slowing down.

Gustely expected demand for "basic metals," or metals that are key for infrastructure construction such as iron ore, coal, zinc, lead and copper, to increase along with the drive.