Summary of China Basic Materials Monitor - January 2026 Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting the impact of high commodity prices on demand and supply dynamics across various sectors. Key Points Demand Trends - End-user orderbooks are mostly in line with past seasonal trends as of mid-January, with **solar and machinery** sectors showing weakness while **battery** demand remains strong [1] - The surge in metal prices has led to notable changes in downstream demand across sectors such as **consumer electronics**, **hardware manufacturing**, **copper cables**, and **aluminum** in industrial and construction areas, resulting in weaker or delayed orderbooks and rising metal inventories [1] - High-frequency data indicates that in the first two weeks of January, Chinese demand is down **1-9% year-over-year (YoY)** for cement and construction steel, and **3-10% YoY** for aluminum and copper, while flat steel demand is up **3% YoY** [1] Supply Dynamics - Supply conditions remain heterogeneous, with consistent feedback on **cement capacity** cleaning up and ongoing capacity discipline in **coal**, but lackluster control in **steel production** [1] - Margin and pricing for **steel**, **copper**, **aluminum**, and **lithium** have improved, while **cement** and **coal** prices have remained stable [1] Sector-Specific Insights - **Cement**: Demand is lower, with a **1-9% YoY** decline noted [1] - **Aluminum and Copper**: Demand has deteriorated significantly amid high prices, with a **3-10% YoY** decline reported [1] - **Steel**: Margins have improved, but production control remains weak [1] - **Battery Materials**: Strong demand persists, leading to price hikes in solar modules, AC, LFP cathodes, and battery cells [1] Producer Feedback - A proprietary survey indicates a mixed month-over-month (MoM) trend in forward orderbooks, with **19%** of respondents reporting a pickup in January for downstream sectors and **6%** for basic materials [2] Additional Observations - The report notes that in regions with strong demand or better supply structures, price hikes have begun in specific materials, indicating a potential shift in market dynamics [1] - The overall sentiment reflects caution due to high commodity prices suppressing demand, particularly in sectors sensitive to price fluctuations [1] Conclusion - The China Basic Materials industry is currently experiencing a complex interplay of high commodity prices affecting demand and supply across various sectors. While some areas like battery materials show resilience, others like aluminum and copper are facing significant demand challenges. The mixed feedback from producers suggests a cautious outlook moving forward, with potential opportunities in regions with strong demand dynamics.

Summary of China Basic Materials Monitor - December 2025 Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting trends in demand and pricing for various commodities including steel, copper, aluminum, cement, and coal. Key Points Demand Trends - End-user orderbooks are mostly in line with past seasonal trends as of mid-December, with specific sectors like appliances, solar, construction, and machinery showing weaker demand [1] - Demand for **copper** and **paper packaging** has weakened, while other commodities remain on track [1] - Current Chinese demand is reported to be **3-10% lower year-over-year** for cement and construction steel, and **2-8% lower** for flat steel, copper, and aluminum [1] Pricing and Margins - Despite rising prices for copper and aluminum, the demand response has not been destructive to orderbooks, indicating a cautious procurement pace among end users [1] - There are signs of marginal improvement in steel margins, reflected in higher unit profits, although overall supply work on steel remains limited [1] - Recent weeks have seen improvements in margins/pricing for steel, copper, and lithium, while coal prices have softened, and cement and aluminum prices have remained stable [1] Supply Dynamics - In bulk commodities, general demand has been weak, but policy measures on supply for cement and coal remain intact, including preparations for capacity cuts related to disqualified clinker capacity, which accounts for **4-10%** of total capacity in major producers [1] - Consistent coal supply discipline is maintained through control of excess production and safety inspections [1] Month-over-Month Changes - A proprietary survey indicates that the forward orderbook trend has softened month-over-month, with **11%** of respondents in downstream sectors and **14%** in basic materials reporting a month-over-month pickup in December [2] Additional Insights - The report includes various downstream demand snapshots across sectors such as infrastructure, property, traditional manufacturing, advanced manufacturing, and power, transport, and exports [8] - The report also discusses the implications of commodity price changes and potential risks associated with investment decisions in the basic materials sector [9] Conclusion - The China Basic Materials industry is experiencing signs of bottoming out in bulk commodities, with high metal prices not significantly damaging demand. However, the overall demand remains subdued, and careful monitoring of supply and pricing dynamics is essential for stakeholders in the sector.

Summary of China Basic Materials Monitor (November 2025) Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting signs of **weaker demand** across various sectors, including white goods, renewables, and construction, which are experiencing a sequential deterioration beyond seasonal factors [1][1][1]. - **Infrastructure** projects are at multi-year low start rates due to funding challenges from local governments [1][1][1]. - The **automotive sector** remains robust currently, but concerns are emerging for the first quarter of 2026 [1][1][1]. - **Energy Storage System (ESS) batteries** are seeing accelerated growth, with positive expectations for 2026 based on producer feedback [1][1][1]. Demand Trends - Current demand in China is reported to be **7-12% lower year-on-year** for cement and construction steel, and **5-10% lower** for flat steel, copper, and aluminum [1][1][1]. - Finished goods inventory has increased, primarily due to metal fabrications and selected appliances and machinery [1][1][1]. - The **forward orderbook trend** is mostly stable month-on-month, with **61%** of respondents indicating an increase in downstream sectors and **35%** in basic materials for November [2][2][2]. Supply Dynamics - On the supply side, there is excess production and safety inspections leading to a contraction in output in key coal-producing regions [1][1][1]. - Incremental changes in cement and steel production have been limited [1][1][1]. - Recent weeks have seen improvements in margins/pricing for coal, aluminum, copper, and lithium, while steel prices have softened and cement prices remain stable [1][1][1]. Key Statistics - The report indicates a **deceleration in demand** due to high commodity prices and the diminishing momentum from trade-in programs [1][1][1]. - The **current demand** metrics reflect a significant decline across various materials, indicating potential risks for investors in the basic materials sector [1][1][1]. Conclusion - The China Basic Materials industry is facing challenges with weaker demand across multiple sectors, particularly in construction and infrastructure, while some segments like automotive and ESS batteries show resilience. The supply side is also adjusting to these demand changes, with implications for pricing and production strategies moving forward.

Summary of China Basic Materials Monitor - October 2025 Industry Overview - The report focuses on the **China Basic Materials** industry, particularly construction materials, steel, coal, cement, aluminum, copper, and lithium sectors. Key Points Construction and Demand Trends - End-user orderbooks showed a month-over-month (MoM) increase as of mid-October, aligning with seasonal trends. However, infrastructure construction is deteriorating faster than anticipated, with weakened project start rates. The impact of central government special funding remains unclear based on feedback from construction dealers and producers of cement and construction steel [1][2][3] - Current Chinese demand for cement and construction steel is reported to be **11-18% lower year-over-year (YoY)**, while demand for copper and aluminum is **5-6% lower YoY**. Flat steel demand has increased by **2% YoY** [2][3] Supply Side Dynamics - There have been no significant cuts in steel production, while corrections in excess production and safety inspections in coal continue. Domestic disruptions in copper scrap have deepened [2] - Recent weeks have seen improvements in margins/pricing for coal, cement, aluminum, copper, and lithium, while steel prices have softened [2] Producer Feedback and Order Trends - A proprietary survey indicates that **61%** of respondents in downstream sectors and **26%** in basic materials reported an MoM increase in orderbooks for October. Conversely, **26%** of respondents indicated a lower MoM trend [3] Price and Margin Analysis - Margin improvements have been noted across several materials, including coal, cement, aluminum, copper, and lithium, while steel margins have softened [2] Market Sentiment - The overall sentiment in the basic materials sector reflects a cautious outlook due to the declining trends in construction and infrastructure projects, despite some positive signals in specific sectors like auto/EV and battery production [1][2] Additional Insights - The report highlights the importance of monitoring the impact of government funding on infrastructure projects, as its effects are yet to be fully realized [1] - The data suggests a potential shift in investment focus towards sectors showing resilience, such as auto/EV and battery production, while traditional construction materials may face ongoing challenges [1][2] This summary encapsulates the critical insights from the October 2025 report on the China Basic Materials industry, emphasizing the current demand trends, supply dynamics, and market sentiment.

Summary of China Basic Materials Monitor - September 2025 Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting the current demand and supply dynamics affecting pricing and margins in various sectors including construction, automotive, and metals [1][2]. Key Points Demand Trends - **End-user orderbooks** have shown a month-over-month (MoM) increase as of mid-September, consistent with seasonal patterns observed in previous years [1]. - **Aggregated demand** is driven by positive growth in sectors such as **automotive**, **battery production**, and **metal fabrication**, alongside mild seasonal increases in **construction** [1]. - Traditional sectors like **white goods**, **property**, and **machinery** are experiencing weaker demand [1]. Supply Disruptions - Ongoing **supply disruptions** are noted, particularly in: - **Lithium Lepidolite** production - A correction in excess **coal** production - Tightness in domestic **copper scrap** supply [1]. - The Chinese government has reaffirmed its policy on supply management (anti-involution) as a long-term strategy, which is expected to support overall commodity pricing and margins [1]. Pricing and Margin Outlook - Current demand for **cement** and **construction steel** is reported to be 1-6% lower year-over-year (YoY), while **copper** and **aluminium** demand is down 5-7% YoY. In contrast, **flat steel** demand has increased by 3% YoY [1]. - Recent weeks have seen improvements in margins/pricing for **aluminium** and **copper**, while **steel**, **coal**, and **lithium** prices have softened, with **cement** prices remaining stable [1]. Producer Feedback - A proprietary survey indicates that **52%** of respondents in downstream sectors reported an improvement in orderbook trends for August, while **32%** of basic materials producers noted similar improvements [2]. - Conversely, **9%** of downstream respondents and **16%** of basic materials producers indicated a decline in orderbook trends [2]. Additional Insights - The report includes detailed snapshots of downstream demand across various sectors, including infrastructure, property, traditional manufacturing, advanced manufacturing, and exports [7]. - Specific commodity analyses cover **steel**, **coal**, **cement**, **aluminium**, **copper**, and **lithium**, providing insights into their respective demand and pricing trends [7]. Conclusion - The China Basic Materials industry is currently experiencing a complex interplay of steady demand growth in certain sectors and ongoing supply disruptions, which collectively influence pricing and margin expectations. The outlook remains cautiously optimistic, supported by government policies aimed at stabilizing supply and pricing dynamics [1][2].

Summary of China Basic Materials Monitor - August 2025 Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting recent trends in commodity prices and demand dynamics. Key Points Demand and Supply Dynamics - End-user orderbooks remained stable month-over-month (MoM) as of mid-August, indicating a lack of inspiring demand, particularly in infrastructure and renewables sectors [1] - Current Chinese demand for cement and construction steel is estimated to be **3-7% lower year-over-year (YoY)**, while demand for copper and aluminum is **6-11% lower YoY**. Flat steel demand has increased by **5% YoY** [1] - The average prices of main commodities have increased by **2-13% sequentially** in August, marking the first broad price hikes since April 2021 [1] Price Trends - Significant price increases were noted in **lithium** and **met coal**, leading the price hikes in upstream commodities [1] - Improved margins in steel have delayed production cuts, while higher lithium prices are expected to enhance global supply flexibility [1] Supply Policies - New safety standards and controls on coal overproduction are being implemented, along with proposed technical specifications for monitoring cement production and clean-ups in lithium mining licenses [1] - Supply policies are still in early stages but indicate a positive direction for the industry [1] Producer Feedback - A proprietary survey indicated that **26%** of respondents in downstream sectors reported a MoM increase in orders, while **31%** in basic materials reported the same. Conversely, **17%** and **16%** indicated a lower MoM trend [2] Margins and Pricing Stability - Recent weeks have shown improved margins/pricing for steel, coal, and lithium, while cement, aluminum, and copper prices have remained mostly stable [1] Additional Insights - The report suggests that the current trends in the basic materials sector are influenced by both domestic demand fluctuations and regulatory changes aimed at stabilizing supply and prices [1][2] - The stability in downstream order books, despite the overall weak demand, may indicate a cautious optimism among producers regarding future market conditions [2] This summary encapsulates the critical insights from the August 2025 China Basic Materials Monitor, providing a comprehensive overview of the current state of the industry and its future outlook.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Coal Sector - **Focus**: Coking Coal and Thermal Coal Core Insights 1. **Overproduction Issues**: - 22% of sampled coking coal mines are experiencing overproduction, impacting 26% of their volume [2][3] - 14% of sampled thermal coal mines have overproduction issues, affecting 3% of total capacity [4][7] 2. **Market Dynamics**: - The met coal price is expected to become attractive for imports when it reaches approximately Rmb1300/ton [2][3] - Thermal coal prices are projected to rebound to Rmb670/ton during the summer but may soften to Rmb610/ton by year-end [4] 3. **Government Policies**: - The National Energy Administration (NEA) and local governments are expected to implement moderate execution of overcapacity policies to balance production stability and local economic interests [3] - The tone from the Xinjiang NDRC appears more lenient compared to Henan and Ordos, indicating varying regional approaches to overproduction management [3] 4. **Production and Cost Analysis**: - The all-in cost for most Chinese met coal is between Rmb600-1,000/ton, leading to losses earlier in the year but returning to profitability recently [3] - Current daily output of met coal is approximately 1.9 million tons, which is 5% higher than the year's low but still 10% below the peak of 2.1-2.2 million tons expected in 2024 [3] 5. **Future Projections**: - The thermal coal production target for Shanxi is set at 1.3 billion tons for 2025, with 662 million tons produced in the first half of 2025 [4] - The expert anticipates a smaller volume impact from overproduction in the current cycle, at most 50% of what was seen in the previous cycles [4] Stock Implications - **Company Exposure**: - Among coal companies, Yankuang has the highest exposure to coking coal and coal spot sales, with 75% of its sales being spot sales, making it the most sensitive to coal price fluctuations [5] Additional Considerations - **Risks**: - Key risks include economic conditions, government policies affecting coal prices, and the balance of supply and demand in the coal sector [8] - Potential for higher-than-expected growth in fixed asset investment (FAI) in the coal sector and looser government policies could impact market dynamics [8] Conclusion - The coal sector in China is facing significant challenges with overproduction, but there are opportunities for price recovery and strategic adjustments in response to government policies. Investors should closely monitor these developments, particularly in relation to specific companies like Yankuang, which are more exposed to market fluctuations.

Summary of China Basic Materials Monitor - July 2025 Industry Overview - The report focuses on the **China Basic Materials** industry, highlighting the current state of demand and supply dynamics as of July 2025. Key Points Demand Trends - **End-user orderbooks** showed a mild month-over-month (MoM) increase but remained at low levels, indicating weak overall demand [1] - **Infrastructure construction** has weakened significantly, with a noticeable deceleration in new project starts due to ongoing funding constraints and stringent payment requirements [1] - **Metal demand** has softened, with signs of inventory buildup in the supply chain, influenced by seasonal softness and a sequential correction in domestic solar demand [1] - Current Chinese demand is reported to be **7-11% lower year-over-year (YoY)** for cement and construction steel, and **1-10% lower** for copper, flat steel, and aluminum [1] Supply Dynamics - The determination on supply adjustments remains mixed, with: - **Steel production cuts** beginning but with heterogeneous targets discussed [1] - Local government commitments on capacity elimination in cement being absent [1] - Marginal coal miners showing reluctance to cut production amid poor pricing [1] - Surprises in the oversupplied lithium market due to mining license approval inspections [1] - Recent weeks have seen improvements in margins/pricing for steel, coal, and lithium, while cement, aluminum, and copper prices have weakened [1] Producer Feedback - A proprietary survey indicated that **31% of respondents** in downstream sectors and **30%** in basic materials reported a MoM pickup in July, while **25%** and **24%** indicated a lower MoM trend, respectively [2] Additional Insights - The report emphasizes the **importance of funding** in infrastructure projects, which is currently constrained, affecting new project initiations [1] - The **mixed signals** in supply adjustments suggest a complex market environment where producers are navigating between demand pressures and pricing strategies [1] Conclusion - The China Basic Materials industry is experiencing a challenging environment characterized by weakening demand, mixed supply responses, and significant pressures on pricing and margins across various materials. The insights from producer feedback and high-frequency data provide a nuanced understanding of the current market dynamics, indicating potential risks and opportunities for investors in this sector.

Investment Rating - The report provides a "Buy" rating for several companies in the basic materials sector, including Angang-H, Baosteel, Conch-A, and Zijin-A, indicating a positive outlook for these stocks with potential upside ranging from 22% to 51% [10]. Core Insights - The feedback from producers as of mid-May suggests that end-user order books were flat month-over-month (MoM), which is softer than past seasonal trends. Infrastructure recovery has paused, reflected in weak cement shipments and a lack of funding for new projects [1][2]. - Current Chinese demand for cement and construction steel is reported to be 12-14% lower year-over-year (YoY), while demand for copper has increased by 9% YoY. The demand for flat steel and aluminum is 1-3% lower YoY [1]. - The report highlights that while the supply chain is partially replacing US-bound shipments with production from other countries, the reduction in Chinese metal demand is less severe than initially feared [1]. Summary by Sections Downstream Demand Snapshots - The downstream order book trend was mostly stable MoM in May, with 25% of respondents indicating a pickup in the downstream sectors and 31% indicating a lower trend [2][3]. Steel Production - Steel production cuts are in preparation, and rush orders for exports are re-emerging. The report suggests that steel-making raw materials could potentially drop to sub US$80-90 per ton if production cuts are implemented [9]. Cement Market - The cement market has experienced a sudden deterioration, with current demand showing significant declines [9]. Aluminium and Copper - The report notes a disruption in Guinea bauxite supply affecting alumina, while copper demand remains more resilient than expected [9]. Coal Market - The coal market is characterized by very weak demand and pricing, indicating challenges for companies in this sector [9]. Lithium Market - The lithium market is facing a rising surplus, which may impact pricing and demand dynamics [9]. Paper Packaging - Improving shipment trends are noted in the paper packaging sector, driven by upcoming online shopping festivals and lower US-China tariffs [9].

Investment Rating - The report provides a mixed investment rating for various companies in the basic materials sector, with specific recommendations such as "Buy" for companies like Angang-H and Conch-H, while others like Maanshan-A and Chinacoal-H are rated as "Sell" [10]. Core Insights - The overall sentiment in the basic materials sector is that current demand is less concerning than previously anticipated, with a notable deceleration in local government special refinancing bond issuance impacting infrastructure recovery [1]. - Current Chinese demand for cement and construction steel is reported to be 12-14% lower year-on-year, while copper demand has increased by 9% [1]. - The downstream order book trend has remained mostly stable month-on-month, with 31% of respondents indicating a lower trend in May for basic materials [2][3]. Summary by Sections Downstream Demand Snapshots - Infrastructure recovery has paused due to a lack of funding for new projects, leading to weak cement shipments [1]. - The demand for construction materials is showing signs of weakness, particularly in cement and construction steel, while copper demand remains resilient [1]. Steel Production - Steel production cuts are in preparation, with a potential reduction in prices if these cuts are implemented [1]. - The report notes that rush orders following the reduction of US-China tariffs were limited, primarily driven by Southeast Asia [1]. Commodity Prices - The pricing for steel and cement has remained stable, while prices for aluminum and copper have improved, contrasting with the softening of coal and lithium prices [1]. Specific Company Insights - Angang-H is rated as "Buy" with a target price of CNY 2.40, indicating a potential upside of 45% [10]. - Conch-H is also rated as "Buy" with a target price of CNY 29.00, reflecting a 37% upside potential [10]. - Companies like Maanshan-A and Chinacoal-H are facing downward pressure, rated as "Sell" with target prices significantly lower than current prices [10].