China’s ongoing economic slowdown, driven largely by a real estate crisis, is significantly reshaping global commodity markets.

As demand for construction materials plummets, the ripple effects are being felt far beyond Beijing — disrupting trade flows, reshuffling global suppliers, and creating both risks and opportunities for producers and traders worldwide.

The Decline of China’s Construction Sector

China’s property sector, once the backbone of its economic boom, is now mired in crisis.

Since the collapse of major developers like Evergrande and Country Garden, construction activity has slowed dramatically.

Real estate investment dropped by over 9% in 2024, and home sales have yet to recover meaningfully.

The decline is structural: years of overbuilding, demographic shrinkage, and Beijing’s deleveraging push have ended the era of real estate-led growth.

As a result, the consumption of key construction-related commodities — notably steel, copper, aluminium, cement, and iron ore — has sharply declined.

For example, steel demand, heavily tied to residential and infrastructure building, has fallen for three consecutive years, leading Chinese mills to curtail production and cut imports of raw materials like iron ore and metallurgical coal.

Impact on Global Commodity Trade

This weakening demand is creating a significant surplus of construction-related commodities on global markets.

Major exporters of iron ore, such as Australia and Brazil, have already seen prices soften and are exploring new markets to offset reduced Chinese buying.

However, opportunities to redirect these materials are mixed.

While some developing countries in Southeast Asia, Africa, and the Middle East are ramping up infrastructure spending, none match China’s historical appetite.

For instance, India’s infrastructure push offers promise, but its import capacity and demand scale are still relatively modest compared to China’s peak years.

For traders, this shift means lower margins and greater price volatility in construction commodities.

Many are responding by diversifying portfolios — investing in non-construction commodities or entering newer markets with higher growth potential.

Shifts in Demand for Other Commodities

Interestingly, the downturn in construction is influencing demand dynamics in other sectors:

• Energy commodities: Reduced construction activity has translated into softer demand for thermal coal and industrial fuels. However, China’s continued focus on manufacturing and data centres is keeping electricity demand robust, especially for renewables and natural gas.
• Green transition metals: While traditional industrial metals suffer, the Chinese government is doubling down on its energy transition. This is driving demand for lithium, nickel, rare earths, and polysilicon — essential to electric vehicles and solar panels. As construction-linked metals decline, these “future-facing” commodities are gaining attention.
• Agricultural imports may also benefit indirectly. With fewer resources funnelled into real estate, China may reallocate toward improving food security, potentially boosting demand for soybeans, corn, and other staples.

Strategic Implications

For commodity exporters, the lesson is clear: China’s pivot away from construction-driven growth is permanent.

Relying on it as a demand anchor is increasingly risky.

Diversifying into markets like Indonesia, Vietnam, or Africa will be essential, though logistical and political barriers remain.

Meanwhile, countries looking to reduce dependence on Chinese demand must adjust trade strategies — building regional partnerships, investing in commodity value chains, and aligning exports with sectors aligned to China’s new growth model, such as renewables, EVs, and high-tech manufacturing.