Commodity suppliers hurt by China demand

Updated: 2013-07-12 07:38

By Li Jiabao (China Daily)

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China's slowing commodity imports have been hurting major world commodity suppliers, and the situation won't improve in the second half, experts said on Thursday.

The nation's commodity purchases have been affected by weak overseas demand for its exports and a domestic growth slowdown.

"China's shrinking demand for commodities surely dented the economic growth of major commodity suppliers, and the negative impact will worsen as Chinese economic growth will not see much improvement in the second half of this year, said He Rongliang, an analyst with the Distribution Productivity Promotion Center of China Commerce.

"Imports of natural resources and energy products will not go up significantly," he said.

He added that the demand reduction in China, a leading global buyer of commodities such as iron ore, copper, crude oil and soybeans, could not be offset by any other single economy.

The economic growth of resource exporters has become closely linked to China's economic performance, especially in recent years, said Zhang Jianping, a researcher at the Institute for International Economic Research under the National Development Reform Commission.

Leading commodity exporters such as Brazil, South Africa and Australia will feel the most significant impact from China's shrinking commodity demand, said Wang Haifeng, a researcher from the Institute for International Economic Research under the NDRC.

Australian Prime Minister Kevin Rudd said on Thursday: "In 2013, the China resources boom is over. While exports of resources and commodity volumes are up, the prices we receive for them have now fallen almost 25 percent since their peak and may well fall further.

"Right now, we find ourselves at a crossover point for our national economy. If we make the wrong decisions now, we will be living with those decisions for the decade ahead."

China launched a 4-trillion yuan ($652 billion) emergency stimulus package in the wake of the financial crisis, which boosted infrastructure construction and the import of natural resources and raw materials.

But the new leadership is shifting economic growth away from an investment- and export-driven model to a consumption-oriented pattern, despite sliding growth.

China's imports in June declined 0.7 percent from a year earlier after a 0.3-percent contraction in May, according to the General Administration of Customs.

Crude oil imports by the nation, which is the world's second-largest oil consumer, fell 1.4 percent year-on-year to 140 million metric tons in the first half, while the average import price dropped 7.6 percent.

Net crude purchases in June declined to the lowest level in three months as import-processing refineries carried out maintenance in June and July.

Copper imports plunged 20 percent year-on-year in the first half, with the average import price down 3.4 percent.

Although iron ore imports rose 5.1 percent year-on-year in the first half, the average import price fell 4.6 percent.

"Easing domestic industrial activity subdued imports of raw materials," Zheng Yuesheng, spokesman for the customs agency, told a news conference on Wednesday.

"Meanwhile, overcapacity in industries including steel, cement, shipbuilding as well as the photovoltaic industry reduced the profitability of enterprises and demand for raw materials."

The average price of imported commodities fell 3.9 percent year-on-year in June, marking the 15th month of decline, according to the customs agency.

In its latest World Economic Outlook released on Tuesday, the International Monetary Fund cut its forecast for China's economic growth this year to 7.8 percent from 8.1 percent.

It also downgraded its GDP forecast for 2014 to 7.7 percent from 8.3 percent. It added that the outlook for many commodity exporters has also deteriorated because of lower commodity prices.

"The weak recovery in the global economy was also responsible for China's shrinking demand for commodities, as many such imports are used for making manufactured exports to developed economies," Zhang from the NDRC research institute said.