But China is unlikely to lift or relax restrictions on exports of raw materials including coke, bauxite and zinc any time soon, reiterating its policy is in line with sustainable development of its resources.

"It could be a double-edged sword," said Ben Westmore, commodity economist at National Australia Bank.

"The initial effect is likely to be downward price pressure on those commodities. But it may aid global inflation and as a result of that interest rates can be kept more accommodative for longer.

"Then it could have some positive impact on global growth and, in turn, on commodity prices in the medium- to longer term," said Westmore.

The WTO said on Tuesday that China broke international law when it restrained exports of some raw materials, which also include steelmaking components manganese and magnesium and silicon, used in making computer chips.

It marked a victory for the United States, European Union and Mexico which took China to the global trade body in 2009 saying the export curbs discriminated against foreign manufacturers and gave domestic producers an unfair advantage.

China reiterated on Wednesday that the export measures, which take the form of taxes or quotas or both, "are in line with the objective of sustainable development promoted by the WTO and they help to induce the resource industry toward healthy development".

CURBS LIKELY TO STAY

"Given the power shortages we are facing now and from the viewpoint of strategic raw material reserves management, I don't think the Chinese government will do anything to encourage an increase in exports of raw materials like bauxite," said Zhou Gui Qiu, analyst at Minmetals Futures Co in Shenzhen.

There is no official data on Chinese exports of bauxite, a key ingredient in making aluminium, of which China is the world's biggest producer.

China is a major importer of bauxite, with imports rising 56 percent to 17.3 million tonnes in January through May, according to government data. That volume can make roughly 8.7 million tonnes of alumina, about 60 percent of China's total alumina output for the period.

The bulk of China's bauxite exports are not metallurgical grade used to produce alumina but those meant for the ceramic industry as a fire resistant material, said Wen Xianjun, vice chairman of China Nonferrous Metals Industry Association.

In terms of zinc, China is the world's top consumer and producer, but the country has been a net importer of the base metal used in iron and steel for much of the last eight years.

China imposes an export tax and quota on bauxite exports while zinc shipments have only export duties slapped on.

China is also unlikely to ease a current 40-percent duty on exports of coke, a principal steel-making ingredient, analysts say. China is the world's largest coke producer.

"I don't think China will easily remove its export duty on coke, which is an energy-intensive and environment-polluting product. Also China will not encourage boosting coke production and expand exports. Instead, China has tried to shut down inefficient coking capacities for years, " said Ma Cheng, coke futures analyst at Galaxy Futures in Beijing.

ARTIFICIALLY CUTTING MATERIAL COST

China is most likely to appeal the WTO verdict on a trade practice that is also probably being pursued by other countries, such as India, to feed expansion of their domestic industries.

India, for example, has quadrupled taxes on exports of iron ore this year in an effort to boost supplies for domestic steelmakers.

"Given this latest WTO ruling, I can't imagine it's going to be too long before iron ore consumers around the world start to think, maybe we should present a similar motion to the WTO in the hope of getting a similar ruling," said NAB's Westmore.

The WTO decision was "important as China's export restraints artificially reduce the cost of raw materials in China and increase global prices of these products, giving Chinese manufacturers a subsidy," Michelle Applebaum, analyst at Chicago-based Steel Market Intelligence, said in a note.

"By subsidizing lower-than-market raw materials for the high-cost steel, aluminum and chemical processing industries, the Chinese are also effectively inflating the cost of non-controlled raw materials that impact the rest of the globe.

"Lower-than-market coke prices, for instance, allow high cost Chinese mills, who must reach to the open market to buy iron ore, to allocate greater resources to purchases of other raw materials," added Applebaum.

The WTO issued an unusually stark warning about such export policies last month, saying they risked creating serious shortages.

The case is of particular importance to the EU, whose raw materials purchases from abroad make up 10 percent of its total imports, and which are used in production and manufacturing processes.

Reuters