Chinese automobile market provides optimism
Chinese automobile market provides optimism

4 July 2023 – Chinese automobile market provides optimism. Tesla exceeds expectations. Strong steel demand from Asia, Africa and the Middle East. And SHFE stainless steel stocks down, nickel stock critically low.

China: Automobile market provides optimism  

Budding optimism in the Chinese automobile market. According to preliminary forecasts of the Chinese Car Dealers Association (CPCA), retail sales of vehicles with new drive technologies amounted to 670,000 units in the past month – 16 percent above the previous month. Year-on-year growth was as high as 26 percent. The car market is receiving tailwind from high pent-up demand.

Recently, the Chinese government announced that it would extend the existing tax breaks for car buyers until 2027. This brings the subsidy package for the automobile industry to about 72 billion US dollars. If the recovery in the world’s largest car market continues, car manufacturers worldwide should benefit. 

Tesla with significant production increases 

The US e-vehicle manufacturer Tesla was able to report excellent sales figures. According to Tesla, it produced 85.5% more vehicles than in the same period last year and almost doubled the number of new vehicles delivered. And Tesla has already set its sights on India, the next giant market, and is thinking about setting up another automobile production facility there. 

Chinese steel industry takes advantage of strong demand from Asia, Africa and the Middle East 

China is set to export a record amount of steel this year, the first time since 2016. The weakening yuan and competitive prices have helped China abroad. In the first five months, steel exports were up 41% year-on-year as overseas appetite improved. Analysts predict that exports could exceed 77 million tonnes by 2023. The depreciation of the yuan and attractive export prices have been key factors in this growth. Demand from Asia, Africa and the Middle East remains strong, while the resumption of Chinese-backed overseas construction has also helped boost exports. 

Chinese investment in infrastructure and the property sector is beginning to bear fruit 

In addition, as reported before, the Chinese economy have picked up significantly since March. Beijing’s massive investment in infrastructure and the property sector is beginning to bear fruit. The recovery should gain further momentum in 2023 on the back of robust local government bond issuance, accelerated project starts and supportive policies at both central and local government levels. Expect state-owned enterprises, especially centrally-administered ones, to continue gaining market share in 2023, given their funding, scale and construction advantages. This will ensure rise in domestic demand for metals as well.

SHFE stainless steel inventories down, nickel inventory critically low 

Inventories on the SHFE have fallen significantly in recent weeks. Copper, aluminium, lead and stainless steel inventories at the beginning of July 2023 are between 27 and 35% lower than in mid-June. However, the decline is particularly dramatic for nickel stocks at the SHFE. Here, inventories have plummeted by almost 70%. Prices for base metals are therefore likely to be further supported by the depleting warehouses at the SHFE.

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