HSBC-Mainland China October s commodities output More strength to aluminium amid tighter market-20251114

October’ output (Y-o-Y): aluminium (+0.4%), coal (-2%),cement (-16%), steel (-12%), and glass (+3%)

Robust demand and tight supply keep base metal prices strong,with further upside risks given the tight market balance

We prefer Aluminium the most in China materials, but we arepositive on construction materials on a longer outlook

Aluminium output remained strong, flat y-o-y at 3.80mt in October’ , pp d brobust smelter margin and strong demand: YTD output is up 2.0% y-o-y to 37.8mt,supported by robust production across provinces, encouraged by elevated smeltermargins as raw material prices (alumina, coal) fell sharply in the year. That said, coalprices improved recently on tightened market balance. As aluminium production levelshave already touched the capacity cap of 45mt in China, we believe sequential growth insupply will be muted. We expect Chinese aluminium supply to grow 2.5% y-o-y in 2025but slow down to 0.5% in 2026. Aluminium industry fundamentals look solid, backed bythe 45mt production cap and resilient demand. LME/SHFE aluminium spot pricesimproved +8%/+6% from the start of October, attributable to robust demand and recentsupply disruptions (Grundartangi smelter in Iceland and Mozal smelter in Mozambique);we see further upside risks given the tight market balance.