Asia-Pacific’s mineral exporters face bumpy ride amid China’s ‘sputtering demand’, property woes

China’s woes do not bode well for Asian countries like Indonesia, the Philippines, Australia that export commodities like iron ore, bauxite and nickel

China’s other sectors like electric vehicles and demand from India are likely to offset some impact, but exporters will have to seek newer markets, analysts say

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An employee works on a steel pipe at a factory in Weifang, in China’s eastern Shandong provinc. The property sector and infrastructure are two of the largest segments fuelling China’s demand for products like steel, copper and aluminium. Photo: AFP

Published: 7:30pm, 6 Feb 2024

China’s property woes following the liquidation of embattled developer Evergrande have raised concerns of slower demand for raw materials from the world’s leading metal producer and weigh on suppliers across the Asia-Pacific.

China accounts for more than half of the world’s minerals demand for metals production, and the property sector and infrastructure are two of the largest segments fuelling demand for products like steel, copper and aluminium.

“The real estate industry will probably take some time to recover. Consumer confidence is relatively low and the demand for housing will not re-bounce soon. Thus, the import demand for mineral commodities related to construction is likely to be reduced,” said Rose Xiaowei Luo, a professor of entrepreneurship and family enterprise at graduate business school INSEAD in France.

An unfinished residential compound developed by China Evergrande Group in the outskirts of Shijiazhuang, Hebei province. Photo: Reuters

That does not bode well for Asian countries like Indonesia, the Philippines and Australia, who are key exporters of commodities like iron ore, bauxite and nickel to China.

China’s other sectors like electric vehicles and emerging demand from growth hotspots like India are likely to offset some of the impact, but exporters will also have to look for newer markets, analysts say.

International rating agency Moody’s said the decision on Evergrande has increased the possibility of more cases of liquidation of distressed developers, which is likely to affect purchases by homebuyers.

Jon Mills, equity analyst at Sydney-based Morningstar, said the hardest impact of China’s property turmoil on commodities is likely to be on iron-ore, the key ingredient for making steel, because of the country’s dominance. China accounts for around 70 per cent of the global demand for seaborne iron ore trade.