Citing the dramatic drop in demand for energy products, ores, and gains as the factors impacting total exports to China, the UN report raises concerns for economies that rely on exports of primary goods.
Global exports of commodities to China, the study projects, could plunge by nearly half in 2020 to $15.5 billion from $33.1 billion in 2019. Between $3 and $8 billion of the decline UNCTAD projects would impact commodity-dependent developing countries.
“Because China absorbs about one-fifth of world commodities’ exports, such a drop in its imports would have a dramatic impact on producers of primary goods,” says Marco Fugazza, a UNCTAD economist who conducted the study. “There have been few assessments done so far at a relatively disaggregated product level using up-to-date information,” he says, adding that UNCTAD awaits similar statistics from other big markets, such as the European Union, to expand the analysis.
The UNCTAD study issued before the latest round of political friction between China and the United States highlights the continuing impact of the coronavirus on global trade and the potential ramifications for the shipping industry.
The uncertainties in the Chinese commodity markets increased in recent days as the Community Party said it would drop its annual growth targets. The markets responded by driving down prices on key commodity contracts including metals, agriculture, and energy products.
Adding to these tensions are reports that China has also told state-owned firms to halt purchases of soybeans and pork from the United States. According to Reuters, China is ready to halt imports of more agriculture products if Washington takes more action on Hong Kong. China had pledged under the initial trade agreement signed in January 2020 to buy an additional $32 billion worth of U.S. agriculture products over two years. China’s government, however, is seen as retaliating with the commodity imports for the United States’ decision to revoke Hong Kong’s special status. The Trump administration took these steps in response to China’s actions which are seen as limiting or removing Hong Kong’s autonomy from the central government.
These tensions may further affect UNCTAD’s forecasts for declines in Chinese imports. Among the commodities, the study projects will be the hardest hit are imports of liquefied natural gases, which are projected to fall by up to 10 percent in 2020. That compared with a projected 10 percent increase before the COVID-19 outbreak. Similarly, wheat imports are now projected to decrease by 25%, twice as much as before the crisis.
Other sectors, however, are projected to continue to show increases, but at a slower rate versus estimates before the spread of the coronavirus. For example, UNCTAD projects that iron imports will still increase, but growth could fall by two-thirds, from a pre-coronavirus annual growth projection of 19 percent, to just 6 percent.
Among the commodity sectors that are projected to continue to show strength are Chinese imports of soybeans, which are now projected to show a 10 percent increase over earlier forecasts for a total growth of 34 percent year-over-year. The annual growth rate for copper imports is also expected to double, from a 5.4 percent projection pre-pandemic to a new estimate of 11 percent total growth.
“While large exporters of natural gases to China, such as Myanmar, may see their trade perspectives deteriorate because of the coronavirus pandemic,” Mr. Fugazza concluded, “other countries such as Equatorial Guinea may see an exponential increase in, for example, exports of wood.”
TURKISH MARITIME NEWS