Greater China Materials Demand Diverges: Weak End Demand, with Coal Supply Disruptions Providing Localized Support
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Greater China Materials Demand Diverges: Weak End Demand, with Coal Supply Disruptions Providing Localized Support
Steel output rose sequentially, but air-conditioner production schedules, auto retail sales, and cement demand remain weak, putting near-term pressure on the materials sector outlook.
- Average daily crude steel output at key steel mills was 1.973 million tonnes in early August, up 5.8% from late July and down 4.9% year over year.
- Planned domestic air-conditioner production for September declined 6.5% year over year, with the decline narrowing from August; planned export production declined 7.1% year over year.
- New energy vehicle retail sales totaled 951,000 units in July 2026, down 3.9% year over year; passenger vehicle retail sales totaled 1.461 million units, down 20.9% year over year.
- Cement demand in East and South China was weighed down by typhoons, rainfall, high temperatures, and competition from low-priced cement, leaving prices broadly weak.
Report interpretation
Overview
Morgan Stanley published a Greater China materials demand tracker, compiling high-frequency data for steel, home appliances, automobiles, coal, lithium chemicals, and construction materials. The report indicates that while some supply-side indicators have recovered or been disrupted, most end-demand indicators remain weak.
Core views
For steel, average daily crude steel output at key mills recovered sequentially in early August, but remained negative year over year. Home appliance and auto demand remained weak: planned air-conditioner production for September was still down year over year, while new energy vehicle and passenger vehicle retail sales in July and early August both weakened year over year. Recovery in construction-material demand was constrained by weather disruptions and regional low-price competition. Insufficient coal mine restarts and coal-washing plant shutdowns supported coal prices, while restarts of lithium chemical production lines increased attention on supply.
Analysis framework
The report uses high-frequency tracking based on industry associations, third-party surveys, and market data, covering output, production schedules, retail sales, restart progress, and regional price changes to assess short-term supply-demand changes across the materials value chain.
Methodology notes
Uses high-frequency production, sales, production scheduling, pricing, and supply-disruption data to observe conditions in the materials industry.
Data sources include CISA, AVC, CPCA, Mysteel, and regional market surveys; the report focuses on short-term marginal changes and does not constitute a full earnings forecast or valuation analysis.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Steel and Steel-Related EquitiesDemand Tracking Target
- Strengths
- Key steel mill output recovered sequentially, indicating improved production activity.
- Weaknesses
- Output remained down year over year, while end-demand data were weak.
- Comparison
- Sequential supply-side improvement is stronger than downstream consumption performance.
- Risks
- Slower-than-expected recovery in property and manufacturing demand, and intensifying price competition.
- Cement and Construction Materials EquitiesDemand Tracking Target
- Strengths
- Regional prices are currently broadly stable.
- Weaknesses
- Typhoons, rainfall, and high temperatures constrain construction demand, while South China prices are weakening.
- Comparison
- Prices are stable in East China, while South China is more visibly impacted by low-priced cement from Guangxi.
- Risks
- Prolonged weather disruptions, delayed demand recovery, and regional supply competition.
- Coal-Related EquitiesSupply Disruption Beneficiary
- Strengths
- Insufficient coal mine restarts and coal-washing plant shutdowns support coal prices.
- Weaknesses
- The report provides no evidence of improvement in end coal demand.
- Comparison
- Compared with most materials subsectors facing weak demand, coal supply constraints are more pronounced.
- Risks
- Faster restarts, removal of shutdown measures, and further weakening in downstream demand.
- Lithium Chemical-Related EquitiesSupply Tracking Target
- Strengths
- Some high-purity lithium chemical production lines have resumed operations.
- Weaknesses
- Restarts may increase market supply.
- Comparison
- Supply changes are the more direct variable to monitor in this subsector at present.
- Risks
- Supply releases faster than demand improves, putting prices under pressure.
Key data
- Average Daily Crude Steel Output at Key Steel Mills1.973 million tonnes (early August 2026)Up 5.8% from late July and down 4.9% year over year.
- Planned Domestic Air-Conditioner Production for SeptemberDown 6.5% year over yearThe decline narrowed from August; planned export production declined 7.1% year over year.
- July New Energy Vehicle Retail Sales951,000 unitsDown 3.9% year over year and 5.8% month over month.
- July Passenger Vehicle Retail Sales1.461 million unitsDown 20.9% year over year and 8.8% month over month.
- New Energy Vehicle Retail Sales from August 1 to 9195,000 unitsDown 17% year over year and 4% month over month.
- Shanxi Coal Mine Restart Progress34% below the pre-shutdown levelAs of August 12; tight supply supported coal prices.
Impact & implications
Weak demand implies limited basis for near-term inventory destocking and price increases in steel, construction materials, and materials linked to durable-goods consumption. Restricted coal supply may improve price elasticity, but restart momentum warrants monitoring; lithium chemical production-line restarts may add supply pressure.
Risks
- High-frequency data reflect only short-term changes and may not represent full-year trends.
- Weather, policy implementation, and regional supply changes may rapidly alter construction-material and coal prices.
- Further weakening in end consumption, including automobiles and home appliances, could weigh on materials demand.
- The report does not provide full valuation, earnings forecasts, or industry ratings and should not be used alone to form an investment decision.
What to watch
- Whether key steel mill output can shift from sequential recovery to year-over-year improvement.
- Whether actual September air-conditioner output and export performance exceed planned data.
- Year-over-year changes in new energy vehicle and passenger vehicle retail sales in mid-to-late August.
- Shanxi coal mine restart progress and the duration of coal-washing plant shutdowns.
- Cement prices in East and South China and the impact of weather on construction demand.
- Actual capacity releases and price responses following lithium chemical production restarts.