Metals and mining in Europe, Middle East and Africa (EMEA) is the sector most exposed to a slowdown in Chinese demand, both in terms of sales volumes and the impact of lower prices. So says Moody’s in a report sent to Kallanish.

China’s gdp growth is forecast at 6.3% on-year in 2016, slowing towards 6% in subsequent years, following expected 6.8% growth in 2015.

The East Asian giant is a dominant importer and consumer of base metals including nickel, zinc, aluminium and copper. About 20-30% of EMEA mining output, in terms of revenues, is exported to China both directly and indirectly, which is the highest of all sectors, according to the credit rating agency. China’s share of global consumption of zinc, nickel and steel jumped to 46%, 51% and 46% respectively in 2014 from 36%, 27% and 36.5% in 2008.

Moody’s expects anti-dumping duties – imposed or being considered by the European Commission – to support domestic European steel production against China-origin imports, which have spiked after local Chinese consumption declined. “It could also contribute to a more favourable pricing environment for carbon and stainless steel manufacturers in Europe,” the agency says.

“Oil and gas companies will be indirectly affected by weaker demand from China and the effect that it will have on global oil prices, and by reduced demand for LNG, refined products and petrochemicals, which will result in lower volumes and margins across their operations,” Moody’s continues. Companies are responding with significant cutbacks in investments. However, while China’s share of global oil consumption grew to 11.5% in 2014, it remains just over half the level of the US.

In the automotive industry, meanwhile, “… a slowdown in sales growth in China will depress earnings for European manufacturers, both from a lower share of income and lower dividends from joint ventures as well as lower exports to China,” Moody’s observes. European automakers have made significant investments in recent years to increase their production capacity in China.

Chinese car sales have slowed considerably in the past year. In the 12 months through July sales rose 3.4% on-year, which is about half the rate of 2014. Nevertheless, Moody’s expect mid-single digit sales growth in China in 2016 which is still faster than in Europe or the US.