EFTA01458991

8 December 2015 World Outlook 2016: Managing with less liquidity Chinese metal demand is structural in our view, with over 60% of Chinese demand related to; infrastructure, property and industrial manufacturing. The remaining 40% is related to consumer demand. Unfavourable demographics with an ageing working population is the main driver for slower metals demand in property related demand sectors. We forecast demand growth from the property sector to be essentially flat with lower "new" demand being offset by replacement demand as lower-quality buildings are upgraded. Metal demand from infrastructure is also likely to be low single digits, with many of the tier-1 and tier-2 cities close to being fully developed, in our view. Infrastructure build in the lower tier cities offers some upside as does the upgrading of some early infrastructure builds. However, the jury is still out as to whether the more limited employment and social benefits will entice the general population to relocate to these tier-3 cities. The over- capacity in many basic industrial sectors such as mining, metal refining and processing, ship-building has led to a significant decline in capes. Basic industry is unlikely to be a driver of metals demand until the over capacity is squeezed out of the market. Industries further down the value chain tend to be more knowledge driven and less metal intensive, and any growth in these sectors is unlikely to offset the weakness in the basic industries. Demand growth in Auto's and white goods remains the bright spot for Chinese metals demand. We forecast mid-single-digit demand growth with rising metals intensity per unit as higher specification models are purchased. The net result is flat to falling demand growth in steel and low single digit demand growth in the base metals. Figure 10: Chinese copper demand by sector: demand is weighted towards MI Other 8% Electronics 7% Whits Goode 15% Tee nsportaition 11% Indust'. mach. neiy equipment 11% Saws CautsoOkntessore. Building! Construction 21% ectrical network infrastructure 27% Page 64 IFiguie 9: Falling Chinese I' Al te 1 1 I It liet — fomanutakinrig IWO - FAI Real EVAN IVY) wnau.aa (PO•InVeibir/CASI COY) Sane' ORRIO0• Lidn. RHOS* KW Figure It: Chinese copper demand growth by sector: Demand growth remains positive. but structurally lower 250% 1 20.0% 15 .0% max 4 on 4 00X 4 2000 2405 2005-2010 1010 2314 oecirstncOor earamportator 13Total Sam %tact. ant 140•091 iii 2014.2020E •Elececal rethork •InchstralMachrety i4WhIle Geode cEbeliates Deutsche Bank AG/London CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119171 CONFIDENTIAL SDNY_GM_00265355 EFTA01458991