China and India will lead mergers and acquisitions in metals and mining in 2011 after global deals rose 89 percent last year as rivalry for commodities among the fastest growing economies spurs prices, Ernst & Young LLP said.
“The majors out of India and China will lead the deals,” Michael Lynch-Bell, head of mining and metals at Ernst & Young, said in an interview in London. “The Indians are desperate. They are about 10 years behind China. They are really looking for coal and iron ore supply for the next 10 years.”
Indian Prime Minister Manmohan Singh plans $1 trillion of spending to improve the rundown state of road, rail and power networks that the government says carves 2 percentage points from economic expansion. Quarterly growth in China, the largest consumer of commodities from copper to zinc and iron ore, has outpaced India’s economy for at least the past six years.
Indian companies were the seventh most acquisitive in mining and metals last year, up from the 14th a year earlier, Ernst & Young said in a report published today. The country, which recorded $4.6 billion of deals, for the first time surpassed China, with $4.5 billion, the consultant said.
“India and China are going head to head in every market for energy sources or metals or minerals or whatever because it is now the critical constraint,” Sunny Verghese, chief executive officer of Olam International Ltd., the Singapore- based supplier of more than 20 commodities, said this month.
Global mining mergers and acquisitions will also expand this year as gains in metals prices, increased earnings and a greater willingness of banks to lend encourage deal-making, according to Ernst & Young.
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