Asia Mining

The National Post is Canada’s second largest national paper.

China’s economy this month decelerated much faster than many economists had anticipated, sending shock waves throughout the commodity sector. Copper, known as the bellwether metal because it is particularly sensitive to changes in global economic growth, plummeted into a bear market last week. And Brent crude prices have contracted about 9% since peaking in late January.

The world economy depends on China to import more and more metals and oil to keep global demand healthy. The country has, after all, the world’s second-largest economy and it’s the biggest consumer of metals and energy. It’s a dependency that’s been in place for the better part of the past decade and that has helped fuel commodity prices and the stocks of the companies that produce them.

But China’s economy is clearly slowing. From double-digit growth just a few years ago, Chinese officials now expect the country’s gross domestic product to increase by 7.5% this year. And, of course, somewhere down the line, China’s economy will transition to an upper-income and slower one.

When that eventually happens, the global market will need another source of demand to fill the giant hole left behind by China. Which begs the question: Can another country ever become a China, so to speak? If not, alternative investors focused on commodities may be out of luck.

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Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

BEIJING AND OTTAWA — Zhang Lianjin remembers the 2008 global financial crisis well. It nearly shuttered his brand-new metal casting factory in Wuhan, the steel centre of China.

Sales for the firm, SAFE-Cronite Asia, have been recovering slowly since the crisis. But while orders are still rising, so far this year they’re growing at only about half the pace the company was expecting. The company’s automotive business is strong, but there’s been a drop-off in orders tied to heavy machinery. And the broader steel industry in China is a worry.

“Many steel mills are really impacted. Some are even closing. There is too much [capacity] in steel mills in China, the economy is slowing down, the market doesn’t need so much and the production is much higher than the market needs,” said Mr. Zhang, the Beijing-based general manager of the European-owned company.

On top of overcapacity and massive overstocking, some competitors are also caught in a shadow banking crisis in which companies borrowed money against their inventory and find themselves unable to repay.

Now, firms like Mr. Zhang’s are having to adjust to the reality that China’s economy is maturing, and double-digit growth is a thing of the past.

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