As the downstream inventory cycle is back to normal in China, we
expect demand to be the focus in the coming months. Thus, we have
added the order book MoM trend indicated by the downstream
producers in our monthly survey. The feedback as of the end of May:
1) inventory remained mostly stable, with auto and property falling
below normal levels for several respondents; 2) we expect a
decelerated sequential improvement in downstream demand in June,
as the percentage of respondents indicating improving MoM orders
has fallen from 57% in May to 25% in June. We have started seeing
signs of a pick-up in demand from construction machinery, some
driven by the property sector; 3) material demand continues to improve
mostly on a sequential basis going into June, with steel and cement
(eastern China) showing a positive trend, while coal remains stable.
■ Steel – where did excess production go?
■ Coal – seaborne spot price catching up with QHD.
■ Cement– lacking near-term catalysts.
■ Aluminum – extending trough by smelter restarts.
■ Alumina – stable pricing.
■ Copper – strong apparent demand.