China has been the driving force behind rapid global growth over the past 15 years, we know that. It's accounted for almost 70% of gross metals demand and 45% of the gross increase in demand for oil. In comparison, demand for metals in the developed world has been generally negative in that time, and oil demand has slumped nearly a third. That's a big worry, and explains why a Chinese slowdown really matters.
"We highlight potential for demand growth to go negative in the near term which could support a further leg down in commodity prices from here," warns Haitong Securities, the Chinese broker which recently bought rival Espirito Santo.
After crunching the numbers for the past 15 years, it's come up with some startling statistics, the magnitude of which has surprised even seasoned analysts. China has contributed 116% of global copper demand (on a gross basis) and an "amazing" 115% of nickel demand, Haitong has discovered. Meanwhile, developed world demand for materials has shrunk across all materials except aluminium. That is more concerning.
"Consensus metal demand forecasts over the next three years are too high," says the broker. "If demand growth is lower than expected then oversupply is likely to be higher than expected, opening up the possibility of further downside for commodities and materials prices."
"The only commodity that seems less exposed to a China demand slowdown is crude oil, and we believe that it is likely to outperform industrial metals like copper and aluminium in the medium term. We therefore believe that oil stocks can outperform metals over the same period."
That's potentially bad news for the mining sector, but especially worrying for Glencore (GLEN). According to Investec Securities recently, without an uptick in commodity prices, shares in the debt-laden miner and metals trader could be worthless.
"If we are right and the developed world consumer does take over leadership from China, then it is possible that global materials demand growth could be significantly lower than expected in 2015-17, particularly bearing in mind that key emerging markets continue to be impacted by the slowdown in activity in China."
But because China's contribution to crude demand has been less significant, Haitong thinks that once the current oversupply of oil has been worked through, the price of oil could bounce back more strongly. That's why crude should reverse its underperformance against industrial metals (see chart above), and explains why the broker favours Royal Dutch Shell (RDSB), Repsol and Statoil (STO) over miners Antofagasta, Rio Tinto and Norsk Hydro.
It's also easier to predict crude prices as demand growth has been steadier and less cyclical than metals over time.
