Find more statistics at Statista The existence of this slowdown and shift away for investments is a disaster for commodities.China is the world’s biggest importer of crude oil consuming one of every 13 barrels globally, it also imports 45% of the world’s copper and almost half of global aluminium, nickel and steel.Meanwhile revenues at British Petroleum have gone from .77B in Q3 of 2014 to now 61.80B Q2 2015.
This volatility can scare investors and harm firm’s confidence in future investments.
For example, Shell just called off their Artic exploration after having already spent $4.1 billion pursuing it as the price of oil no longer justifies such pursuits.
Find more statistics at Statista On reflection, while this dramatic fall in commodity prices has largely been due to China and falling demand, there have also been supply side factors.
For example, oil fell by almost $10 when news of the Iran deal and Iran’s oil production capacity was released in July.
To reflect this overall fall in revenues for exporting countries and the world as a whole the IMF has recently revised global GDP growth figures for this year from 3.8% a year ago, to 3.3% in July, and now 3.1%.
Beyond the current shift from investment to consumption which is likely to only continue, China’s currency has also been devalued by the government which unexpectedly depreciated the renminbi by 2% while the US dollar has appreciated in anticipation of the American Federal Reserve (the FED) raising interest rates.Beginning with the fall in oil prices in August 2014 there has been growing concern and evidence that China has begun a serious economic slowdown.After a decade of almost 10% breakneck growth, China reported only 7% GDP growth last quarter (which some predict to actually have been much lower) while all future growth estimates are also lower than today’s figures - the only way seems down.Finally, the effects China has had on emerging markets and commodities has now led to another possible threat for economies and firms: a credit crisis.Asian debt, including household and corporate debt, rose from less than 150% of GDP in 2007 to around 200% by the end of last year.CFOs' perceptions of external financial and economic uncertainty have seen the sharpest rise since Deloitte started their survey five years ago.60% of CFOs said that the slowdown in China will have a negative effect on their business in the next twelve months.As evidence, the Asian Development Bank predicts that excluding Japan, the whole South East Asian region’s growth will be 5.8% this year vs. In the latest sign of the slowdown in the world's second biggest economy, Chinese manufacturing activity fell in September to its lowest in six and a half years, according to purchasing managers data.This slowdown has occurred because of the economy shifting from investment to consumption as the main future driver of growth.The proportion of CFOs who think now is a good time to take risk has dropped to 46%, down from 59% in the second quarter and a peak of 72% a year ago (this decline from a year ago is correlated to the beginning of the realisation of China’s slowing growth).The evidence all proves that the declines in commodities have been harmful and widespread for firms.