A man with a face mask sold meat at a market in Guangzhou, Guangdong Province, China, last week.
Photo: alex plavevski/Shutterstock/european pressphoto agencyChina’s coronavirus outbreak has scrambled the global trade in commodities, hitting the country’s massive appetite and challenging global supply lines set up to feed it.
Markets for essentials like natural gas, copper and pork have all swooned amid worry over a broad weakening of demand. Prices for some natural resources are plumbing multiyear lows. Chinese companies are canceling orders for crude oil and other commodities, and the country’s once-heaving ports are quieter.
Analysts say the disruption could be long lasting, as stockpiles of commodities grow and ships lay idle. Since the virus first emerged in the central Chinese city of Wuhan in late December, it has killed more than 1,000 people, primarily in mainland China, among more than 40,000 confirmed cases.
As Chinese industry slows, and movement in and out of the world’s largest consumer of many commodities stalls, the effect on prices has been dramatic.
Since Jan. 17, when China reported the severity of the outbreak, the price of Brent crude, the global oil benchmark, has dropped about 16% and the price of copper is down around 9%. Iron ore has fallen about 11% and a major benchmark in natural gas is trading at its lowest point since August 2009, after losing 20%.
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Jie Ming, a crane manager at the Xixia industrial area of the inland port of Nanjing, said inbound shipments of iron ore have fallen significantly over the past three weeks.
“There is no congestion at the port and inbound calls are down more than 40% compared with last year,” he said. “I’ve never seen it so slow as this.”
Chinese workers were returning this week from an extended New Year holiday. Mr. Jie’s company gave employees the option to stay home until Feb. 16, when executives hope business will have picked up.
Even as some workers returned to work on Monday, border controls in and out of China and movements of people and cargo within the country remained heavily restricted, said shipping officials. Many factories, shops and restaurants remained closed.
A liquid natural gas terminal at a port in Shanghai, China.
Photo: Qilai Shen/Bloomberg NewsIn Shanghai, the world’s busiest port, tug and trucking operators said only about half of the staff that usually load and unload cargo were back at work.
“We have truck drivers that spent the night in their vehicles waiting to unload cargo to ships, that didn’t show up... the usual rush after New Year is not here,” said Li Chen, a tug captain for Shanghai Salvage Co., a state-run maritime services operator.
China consumes over half the world’s metal production, including 75% of its iron ore, the key ingredient in steel making and 15% of its oil.
Some Chinese buyers are declaring force majeure on their contracts to buy commodities, a legal clause that offers some legal protection to buyers who cancel an order arguing exceptional circumstances.
Last week, China National Offshore Oil Corp., which buys about 40% of China’s liquefied-natural-gas imports, declared force majeure on cargoes supplied by Total SA, BP PLC and Royal Dutch Shell PLC, according to tanker brokers and owners and a Chinese oil executive.
Research firm, Rystad Energy, has more than halved its forecast of LNG demand growth this year, to 4.7%, from 13% previously.
The virus is disrupting markets in other ways. That includes the speed at which ships load and unload.
In northern Australia, vessels returning from China to pick up new cargoes of LNG, coal or iron ore can be placed in quarantine for 14 days to make sure crew members aren’t carrying the virus, said shipping services company Gulf Agency Company Ltd., delaying loading at some ports. A unit of Chinese state-owned CITIC Group has put 20 staff members in quarantine at an iron-ore project it runs in Western Australia.
The slowdown is also being felt by exporters of edible commodities to China, an increasingly affluent consumer market of 1.4 billion. In Vietnam, the source of more than a third of the coffee consumed in China, border crossings were shut for 10 days, creating a backlog of 3,000 tons of agricultural goods, including coffee, stuck at customs, the state-run Vietnam News Agency said.
Vietnam’s statistical agency now predicts coffee exports will drop by a third in the second quarter of this year over the same period in 2019 as a result of the virus’s impact, contributing to trade losses of up to $800 million.
The impact is being felt as far as the U.S. Midwest’s farming belt, with traders of poultry and pork complaining of lower demand from China. The price of lean hogs—a type of pork meat traded as a benchmark on the Chicago Mercantile Exchange —has fallen 14% since Jan. 17.
China had increased meat imports from the U.S. after an outbreak of African swine fever in 2018 killed up to half its own pigs. Now the gains are being reversed. “There’s been disruptions at the ports,” Noel White, the chief executive of Tyson Foods Inc., which exports poultry and pork to China, told analysts on Feb. 6. “That has skewed shipments.”
The effect on mining companies has been big. The share prices of Vale SA, BHP Group Ltd. and Rio Tinto PLC, huge exporters to China of iron ore and other resources, are down since Jan. 17, 11%, 5.5% and 11%, respectively.
In Chile, the world’s biggest copper exporter, the government’s trade agency, Cochile held a crisis meeting on Feb. 7 to find alternative destinations to China, according to its website.
“Our exports [to China] are moving slowly. It will be necessary to redirect our exports,” Chilean Foreign Minister Rodrigo Yáñez told the gathering. Cochile also said that sales of Chilean fruit to China had fallen 60% since the start of the crisis.
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— Sarah McFarlane, David Hodari and Joe Wallace contributed to this article.
Write to Benoit Faucon at benoit.faucon@wsj.com and Costas Paris at costas.paris@wsj.com
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