The China Federation of Logistics & Purchasing’s survey revealed that the China Bulk Commodity Index (CBMI) for October 2023 was 102.8%, a decline of 0.8 percentage points from the previous month. After two consecutive months of rising, the index has now dropped. Among the sub-indices, both the supply and inventory indices rose. The supply index rose for the third consecutive month with a more significant increase this month, while the sales index declined from its year-long high. Historically, September and October are peak consumer months. However, after a strong September this year, October’s growth slowed down, indicating that the domestic economy is still recovering. The market demand has not continued to improve as expected after the release of stock demand. From the index change, it reflects a decline from an expansion trend, largely due to the high base effect from the previous few months. Domestic demand remains stable under consistent policies to stimulate consumption and investment. However, with an overall decline in commodity prices, the profit of production companies has shrunk, but the production volume has not decreased. The supply speed is still accelerating, revealing a market imbalance. Hence, the market inventory began to rise this month after four months. As we enter November, the fundamental situation in the industry is unlikely to improve significantly. While infrastructure investment continues, the real estate industry remains sluggish. As temperatures drop in the northern regions, construction will decrease, further reducing demand, leading to intensified supply and demand conflicts. However, if the overall commodity prices continue to weaken, the profit of production companies will be further reduced, which will affect commodity production. Still, with the steady release of domestic momentum and more robust economic policies, there’s a foundation for the domestic economy’s stabilization. We believe that with the support of positive macro policies and a decrease in commodity supply expectations, the bulk commodity market has a strong underlying support, limiting the space for price declines. However, coal, refined oil, and some petroleum-related products may continue to rise or rebound due to their unique fundamentals.
The supply speed continues to accelerate. In October 2023, the bulk commodity supply index continued to rise by 0.5 percentage points from the previous month to 103.9%. Currently, profit, demand, and expectations are the primary drivers for companies, leading to different supply conditions. From August, with the arrival of the traditional peak consumption season and the recovery of the domestic economy and manufacturing, market demand continues to warm up. Production companies have a positive outlook, production enthusiasm is high, and logistics operations are stable. This has ensured the supply of raw materials for production companies, and the production volume has started to rebound. In major commodities, the supply of iron ore, coal, non-ferrous metals, and cars has continued to increase, while steel and chemical supplies have increased but at a slower rate due to the shrinking production profits. This month, the supply of refined oil decreased for the first time since June 2022.
Sales growth began to slow. In October 2023, the bulk commodity sales index declined by 2.6 percentage points from the previous month to 102.8%, showing that after a good performance in September, the market weakened in October. The primary reasons include the moderate recovery of the domestic economy, the weakening role of the real estate industry, high market prices curbing speculative demand, and companies focusing on consuming existing inventory. Most major commodities continued to show an increasing trend in sales, but at a slower pace.
Inventory stopped declining and began to rise. In October 2023, the bulk commodity inventory index rebounded to 101.0%, showing an increase after four consecutive months of decline. This indicates an imbalance in market supply and demand, leading to mounting inventory pressure. In major commodities, steel and iron ore inventories continue to decrease, while others continue to rise at an accelerating rate.
[Source – 上海有色网] 中物联：10月中国大宗商品指数为102.8% 环比下降0.8% https://news.smm.cn/news/102455301
