UBS: China Demand — Mixed Signals in February 2026
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UBS notes that China's February 2026 commodity demand indicators present a mixed picture. Retail sales exceeded expectations, growing 2.8% year-over-year and surpassing both the market forecast of 2.5% and December's 0.9%. Industrial production also beat estimates, climbing 6.3% against a projected 5.3%, supported by resilient external demand and improving domestic consumption. However, the property sector's deterioration deepened, with new starts falling 23% and sales dropping 14%.
In the bulk commodities space, iron ore port inventories rose by 4 million tons week-over-week to a record high of approximately 167 million tons. UBS expects the average iron ore price to decline to $98/ton in the second quarter of 2026, down from current spot levels near $109/ton. This outlook reflects weakness in crude steel output and pressure from the Simandou project's ramp-up, though sustained high Brent crude oil prices from Middle East conflicts could provide cost support above $110/ton.
For base metals, improving consumption and supply-side factors point to upside risks for copper and aluminum fundamentals. Thermal coal demand faces some upside risks, while coking coal prices have dropped to around $220/ton, potentially attracting Chinese and Indian buyers. Domestic wholesale NEV sales were weak, down 16% month-over-month and 13% year-over-year, though February may represent a trough. UBS views the implementation of the 15th Five-Year Plan and Middle East geopolitical dynamics as key near-term catalysts, noting that resilient growth reduces the urgency for immediate policy easing.