Caterpillar Inc. (CAT), General Motors Company (GM), Southern Copper Corp (SCCO): More Signs China’s Economy Is in Trouble

China is the world’s dominant copper consumer

As its name suggests, Southern Copper Corp (NYSE:SCCO) is a big copper producer. Last quarter, the company mined nearly 150,000 tons of copper, which accounted for the vast majority of its earnings and revenue.

China surpassed the US to become the world’s largest copper consumer over a decade ago. In the ten year period between 2001 and 2011, Chinese copper demand increased over 200%, and in 2011, China consumed almost half of the world’s copper.

Copper prices have been falling over the last year, as commodity traders may be pricing in a Chinese hard landing. Along with it, shares of Southern Copper Corp (NYSE:SCCO) have dropped over 8%.

But if China’s economy weakens further, demand for copper should likewise continue to fall. That wouldn’t be good for Southern Copper Corp (NYSE:SCCO) shareholders.

A Chinese slowdown could weigh on the markets

Ultimately, China is a major part of the global economy, and perhaps the single biggest driver of growth since the financial crisis. If China’s economy runs into severe problems, many corporations are going to face challenges. Some more so than others.

Caterpillar Inc. (NYSE:CAT) is an indirect play on Chinese economic growth, as it sells equipment to the mining industry. Southern Copper Corp (NYSE:SCCO), as a miner, is a more direct play, as China is the world’s dominant copper consumer. General Motors Company (NYSE:GM) isn’t nearly as leveraged to the Chinese economy, but the auto giant has focused on China as the source of future growth.

If Chinese economic data continues to paint a bleak picture, it might not be wise to be holding any of them.

The article More Signs China’s Economy Is in Trouble originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends General Motors. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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