When China hits the brakes, commodities exporters half a world away have to shift to a lower gear, as the rapidly deteriorating fortunes of the copper sector shows.
The global financial crisis has impacted China’s copper-wired construction industry, machine makers and electric appliance producers at an amazing speed, with demand at home and abroad crumbling abruptly.
Just as precipitously, China, the world’s largest consumer of copper, has passed on the misery to countries like Chile, its largest copper supplier.
PHOTO: AFP
Chile’s mines have cut production and laid off workers, leading to violent strikes in some parts of the country.
“Business has fallen off a cliff,” Simon Hunt, an independent UK-based analyst, said after recent visits to Chinese and other Asian copper firms.
About 30 percent of China’s copper consumption goes into exports, Hunt said.
“The impact of these [global] developments on China’s economy and its copper consumption will be dynamic,” he said.
World copper prices have more than halved to less than US$1.50 a pound (453g) after record highs of US$4 in July, as China’s once-ravenous hunger for commodities has slowed and weakening demand abroad has hurt exporters.
“As late as July, clients were calling, looking for assurance that China’s copper demand would maintain strong growth,” said Shi Lin, an analyst with British metal consultancy CRU. “Now everyone sees what happened.”
“Growth in China’s copper consumption accounted for 80 percent of the world’s overall growth. It’s no surprise copper prices were impacted so much by weakening Chinese demand,” he said.
China’s economic growth slowed to 9 percent in the third quarter, the lowest level in five years, and the World Bank has predicted it will go down to 7.5 percent next year — a 19-year low.
Copper has been a key raw material in China’s economic boom, and it consumes a quarter of the world’s supply, importing about 80 percent of its needs. Chile provides a third of China’s total demand.
The drop in Chinese demand has led to copper projects in the South American country, such as Canada-based Quadra Mining’s Sierra Gorda project, being shelved.
Commodities such as zinc, nickel, iron ore, and aluminum, too, have seen their prices plummet.
Anglo-Australian miner Rio Tinto said last month it slashed iron ore output at its Western Australia plants by 10 percent following a drop in demand from China. The company said on Wednesday it would cut thousands of jobs globally.
The world’s largest iron ore producer, Brazil’s Vale — whose principal market is China — also slashed production.
Next year’s contract iron ore prices are expected to decline 35 percent as China’s steel sector suffers an industry-wide loss following a fall in steel prices, according to China International Capital Corp (中國國際金融公司).
Economists suggested demand for raw materials in China was not only dented by slowing industrial production, but expectations of prices falling even further, suggesting the worst may be yet to come.
For example, copper will likely follow the economy. Australia’s Macquarie Bank expects Chinese demand to slow to between 6 and 7 percent growth, at 5.1 million tonnes for this year, compared to nearly 18 percent in last year.
It could fall to between 4 percent and 5 percent next year, said Bonnie Liu (劉博雅), a Shanghai-based analyst with Macquarie.
Experts argue that Beijing’s US$586 billion economic stimulus plan was unlikely to boost copper prices anytime soon.
“China’s infrastructure spending spree by itself will not be enough to turn around the decline in major global commodity prices,” Frank Gong (龔方雄), a Hong Kong-based economist with JP Morgan Chase said in a note.
About a fifth of China’s copper demand goes into construction, and the property market has also stalled, with prices rising only 0.2 percent on the year last month — the slowest since monthly statistics began in 2005.
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS