China Basic Materials Monitor_ December 2024_ Still a divided demand picture

Summary of the China Basic Materials Monitor (December 2024) Industry Overview - The report focuses on the China Basic Materials industry, highlighting a divided demand picture as of December 2024, with varying trends across different sectors. Key Points and Arguments 1. Demand Trends: Downstream producer feedback indicates a continuation of trends observed in November, with robust growth in sectors such as EV/auto, appliances, and consumer electronics due to policy stimulation. However, there is a noted softening in demand for construction materials and seasonal products [1][1][1]. 2. Inventory Levels: Current demand for cement and construction steel is reported to be 10-18% lower year-over-year (YoY), while demand for copper is 4-9% higher and lithium is 1.3 times higher. Inventory levels for aluminum are above normal, while alumina and copper inventories are below normal [1][1][1]. 3. Market Conditions: The year-end construction market remains depressed, with a lack of new infrastructure projects leading to declining shipments in cement and weak construction sections in aluminum. The report notes that margins and pricing for aluminum, steel, and lithium have softened, while copper prices have slightly improved [1][1][1]. 4. Order Book Trends: The forward order book trend has softened, with 33% of respondents reporting month-over-month (MoM) improvement in December for downstream sectors and basic materials [1][1][1]. 5. Sector-Specific Insights: - Cement: The absence of new project starts has led to deeper supply cuts [1][1][1]. - Aluminum/Alumina: Weaker demand coupled with surging alumina prices has resulted in lower margins [1][1][1]. - Copper: Strong demand is leading to a drawdown in inventory levels [1][1][1]. - Lithium: The market is likely to remain in deficit in the near term [1][1][1]. 6. Feedback from Producers: The proprietary survey indicates that 80% of respondents are seeing above-normal inventory levels for steel and aluminum, while 100% of respondents report below-normal inventory levels for alumina [1][1][1]. Additional Important Content - The report includes a detailed analysis of the MoM order book trends across various sectors, indicating a mixed outlook for the basic materials market [1][1][1]. - The China PMI data is referenced, providing context for the overall economic environment affecting the basic materials sector [1][1][1]. This summary encapsulates the critical insights from the December 2024 China Basic Materials Monitor, reflecting the current state and outlook of the industry.