The Covid-19 pandemic is expected to put a major dent in China’s commodities imports in 2020, fresh UN research suggests, raising concerns about developing markets reliant on exporting energy products, ores and grains.

The UN Conference on Trade and Development (UNCTAD) has downgraded the estimated value of China’s commodities imports to US$33.1bn over the course of this year, a drop of US$15.5bn compared to annual growth projections before the outbreak.

The organisation warns that could have a serious knock-on effect on exports around the world, particularly in the two-thirds of developing countries that it categorises as “commodity dependent”.

“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,” UNCTAD says.

“For commodity-dependent developing countries, some of the most vulnerable on the planet, the drop is projected to be between US$2.9bn and US$7.9bn, which would constitute a 9% loss in terms of annual growth rate.”

Detailed data made public at the end of May shows that there has been a steep drop in demand for imported energy products, ores and grains from the Chinese market.

Its findings are based on an analysis of Chinese data from January and February this year – when the country was battling to keep the spread of coronavirus under control – and is separate from its discovery that March saw an “unprecedented” 20% fall in worldwide commodities prices.

It is also separate from earlier UNCTAD warnings that global GDP could fall by up to US$2tn due to the pandemic.

Liquified natural gas imports, previously projected to grow by 10% this year, are now expected to fall by up to 10% instead. Wheat imports were already dropping before the Covid-19 crisis, but that decline is now likely to double to 25%, UNCTAD says.

Iron imports – previously tipped to grow by 19% – are still rising, but only by 6%. The report says that means Brazil and Australia, as large exporters of iron, are likely to face significant downward demand from China.


Not all bad news

The decline is not present across all commodities, however. Chinese demand for copper and aluminium is expected to increase compared to pre-pandemic rates, while some agricultural products, including fruits, nuts and rice, are also faring better than expected.

“Differences in import demand shocks at the product level lead to differences in effects at the country level,” the report says. “Even though most countries are expected to be negatively affected, some may see a surge in their exports to China.”

Notably, imports of soya beans from commodity-dependent developing countries are now tipped to grow by 34% this year, 10% more than previous forecasts.

Generally, demand for soya beans in China appears to be growing significantly. In May this year, Brazil’s exports increased by 45% year-on-year, government data shows, with three-quarters destined for the world’s most populous nation.

Despite hopes in the US that its soya bean exports could see a boost following January’s phase one trade deal with China, Brazil’s weakened currency means its produce is currently more competitively priced.

The UNCTAD report also suggests other commodities exporters could make gains despite the crisis. It says producers of wood – including Russia, Papua New Guinea, Congo and Australia – as well as exporters of wool and natural rubber are expected to see an increase in demand.

“While large exporters of natural gases to China, such as Myanmar, may see their trade perspectives deteriorate because of the coronavirus pandemic, other countries such as Equatorial Guinea may see an exponential increase in, for example, exports of wood,” says Marco Fugazza, an economist at UNCTAD who conducted the study.

Fugazza adds, however, that those gains will only materialise if governments prioritise “the removal of any pandemic-specific trade interventions, such as export restrictions”.