Metals &Mining:Alert,Flagging China capacity utilization

China’s production utilization rates remain low on a historical basis, and in manycases below the financial crisis levels. At an aggregate level, China’s industrialcapacity utilization (Figure 1) as measured by the PBoC survey has not recoveredto pre-crisis levels despite recent stimulus, which reflects the broad overcapacitiesacross sectors and questions the sustainability of China’s stimulus. Low utilizationrates across the board are likely to provide a major headwind for industrialcommodity prices and that of the metals and mining sector and is one of the keyreasons for our 6month bearish view. Our commodity team remain short termbearish on base metals and bulk commodities (Global Commodities Focus:Stumbling Toward ‘Normalcy’: 2Q’16 Market Outlook ), and Base Metals — Chineseinvestors retreat following the 1Q16 credit storm