LAUNCESTON, Australia, July 23 (Reuters) – The world is used to seeing China as an importer of raw materials and an exporter of manufactured goods, but a change is occurring that has global implications for commodities.
While China is still the world’s biggest importer of commodities, the nature of its exports are changing.
The big growth in exports this year has been in semi-finished products, most of which fit into the broad definition of commodities. While not raw materials, these include steel, aluminium products and refined fuels.
What is happening in China is that as the country has overbuilt capacity in heavy industries, it is now being forced by economics to seek export markets for intermediate commodities that had previously been consumed at home.
The old dynamic, where Chinese demand for raw materials forced up commodity prices while Chinese exports led to lower prices for manufactured goods, is breaking down.
It now appears that Chinese exports of semi-finished commodities are driving down the price of those goods and threatening industries that produce them in other countries.
At the same time Chinese demand growth for raw materials is slowing just as producers of these commodities, such as iron ore and coal, have ramped up output in the apparently mistaken belief that Chinese consumption would rise for several years to come.
China’s exports of steel products have jumped 27.8 percent this year to 52.4 million tonnes in the first six months of the year from the same period in 2014.
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