China Saps Commodity Supplies
Beijing -- FROM STEAK TO IRON ore to cotton to diamonds, China's rising urban incomes, changing consumer tastes and increased exports are reshaping the world's commodity markets. The country's emergence as a major importer of raw materials is driving global prices higher and catching some suppliers flat-footed.</br></br>Consider the Texan Bar and Grill in Beijing, tucked away in a cavernous Holiday Inn. The waiters wear cowboy hats, boots and blue jeans to serve Beijing diners the restaurant's signature dish: grilled U.S. rib-eye steak. In a sign of the prosperous times in China, a growing number of Chinese can afford a substantial steak lunch, and have developed a substantial taste for one as well. China's beef imports hit record levels last year. And global beef exporters are licking their chops.</br></br>U.S. and Canadian agricultural officials expect China to import 30,000 metric tons of beef next year -- and more than 350,000 tons in 10 years, making China "our No. 1 engine of growth," says Ted Haney, president of the Canada Beef Export Federation.</br></br>Similarly, on a small island near Shanghai, Baogang Steel Group Co., the nation's biggest steel producer, has carved a new deep-water harbor to accommodate huge freighters from Brazil and Australia supplying iron ore, a crucial material used in making the steel for the auto and construction industries. This year, China will import 150 million tons of iron ore, surpassing Japan as the world's largest consumer of the commodity.</br></br>"China has sucked the cupboard bare of raw materials," says Jim Lennon, executive director of commodities research at Macquarie Bank Ltd. in London. Because of its fast growth, Mr. Lennon cautions, China "is starting to place severe strains on the global raw-materials supply chain." Those strains are driving commodity prices sharply higher.