China Basic Materials Monthly
MONTHLY
February 2009: destocking decelerated
Figure 1: Relative price performance by material (normalised from Jan. 2004)
50
100
150
200
250
300
350
400
450
Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Copper
Steel - HRC
Cement
Thermal coal
Aluminum
Steel - Rebar
Chinese Commodity Price Performance (%)
Source: Bloomberg, China Coal Market Network, Mysteel, CEIC, Credit Suisse estimates
■ Channel checks on destocking. The recent China PMI data suggests
decelerating new orders at Chinese steel mills, as a result of a production
overshoot by steel mills in January 2009 and the normalisation of the
downstream manufactures’ utilisation after producers had caught up with
the high-than-expected demand by February 2009. Our survey suggests
that the excess inventory at downstream sectors continued to fall, but has
decelerated as the drawdown was quicker than expected in January 2009 ,
driven by stronger-than-expected end demand in January-February 2009.
Excess inventory days, much more moderated, remain in both the
upstream, such as coal (up to 20 days at IPPs but below normal at cement
plants) and iron ore (0-30 days), and the very downstream, such as
machinery (one to two months) and property. We do see excessive steel
inventory at small mills and traders, likely amount to 3-4 mn tonnes, or
8-11% (nearly half is at steel traders) of the monthly apparent demand,
assuming real demand remained the same from December 2008 to January
2009. We estimate that more than 50% of excess inventory is in
construction steel, putting short-term pressure on domestic steel prices.
■ Steel – softened order improvement, prices dipped to cash cost again
■ Coal – further weakness in the near term
■ Cement– softened prices offset by lower coal costs
■ Aluminum – selective survival in a gloomy market
■ Copper – strong apparent demand?

Table of contents
NJA basic material stocks (Credit Suisse coverage) 2
Credit Suisse commodity price forecast 4
Monthly theme – destocking decelerated as demand improves 5
Downstream demand snapshots 8
Steel – softened order improvement, price dips to cash cost again 10
Asset based valuation – steel 11
Valuation peers – steel 12
Share performance – steel 13
Coal – further weakness in the near term 14
Asset based valuation – coal 15
Valuation peers – coal 16
Share performance – coal 17
Cement– softened price offset by lower coal cost 18
Asset-based valuation – cement 19
Valuations – cement 20
Share performance – cement 21
Aluminum – selective survival in a gloomy market 22
Alumina – premium Chinese CIF price versus parity 23
Copper – strong apparent demand? 24
Other non-ferrous metals 25
Asset-based valuation – gold 26
Valuation peers – non-ferrous metals 27
Share performance – non-ferrous metals 28