Morgan Stanley: China and the Miners
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Key Views
Steel apparent consumption dropped 8.5%, with crude steel output down 2.7%. Aluminum production grew 1.7% YoY to 3.9 million tonnes, supported by capacity restarts in Liaoning and new capacity in Inner Mongolia. Coal output fell 1.7% YoY but rose 3% month-on-month to 3.972 billion tonnes. Iron ore imports held flat at 98 million tonnes, with port inventories slowly declining from elevated levels. Copper imports increased 4% YoY to 446,000 tonnes.
Outlook
The China property team expects Q3 existing-home sales to turn negative year-on-year, with new-home sales declining further. Q3 fiscal stimulus is anticipated to target capex—particularly AI data centers and smart grids. No specific timeframe for price or rating changes was provided.
Recommended Securities
Morgan Stanley maintains an Overweight on BHP.AX as its top diversified pick, citing low-cost WAIO cash flow, a 330Mtpa expansion option, and copper asset upside. Iron ore preference: BHP.AX (Overweight), DRR.AX (Overweight), RIO.AX (Equal-weight), FMG.AX (Underweight). WHC.AX (Overweight) is favored for coal logistics improvements and El Niño-driven demand. PLS (Equal-weight) is preferred over IGO (Underweight), given Greenbushes LOM plan uncertainty.
Key exhibits
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