Zhang Yu: How to concretize and track the prices of midstream manufacturing? — Series Three of the Strategic Bullish Midstream Manufacturing

Ask AI · Why midstream manufacturing prices are becoming the key to a rebound in the PPI?

Text:****Zhang Yu, Chief Economist at Huachuang Securities, Practice License No.: S0360518090001

****Contact:********Fu Chunsheng (18482259975) ****

【Strategic Bullish View on the Midstream Manufacturing Series】

Series 1: Striking the “midstream”: a cry from supply forces—20260303

Series 2: Top ten sectors, order growth—20260304

Report Summary

Key观点: Midstream manufacturing covers a wide range of industries, and most products are largely non-standardized. The core of this report is to select representative prices of 10 finished products/major core components/raw materials from key industries, to make midstream manufacturing prices tangible and to track them—aligning with PPI measures and the market’s perceived “price granularity.” Among the 10 tracked price indicators, 8 have been rising since the beginning of this year (the trend matters more than the magnitude) (Figure 1).

Why focus on midstream manufacturing prices?

Midstream manufacturing is the most certain direction in this year’s economic fundamentals in terms of business cycle momentum. Over the next few years, benefiting from technology upgrades and supply panic driven by a restructuring of global order, it may usher in a strategic era for China’s midstream manufacturing.

For the price level: first, the impact of midstream manufacturing prices on the PPI has been expanding year by year. The PPI weight has increased by about 6 percentage points over the past decade to 41%; second, with supply-demand patterns continuing to improve, the midstream manufacturing PPI month-over-month has risen for four consecutive months. This will be the main endogenous driver behind the PPI rebound.

1. Computer, communications, and electronics PPI: storage chips and CPU prices

Computer, communications, and electronics are both midstream manufacturing and the largest industry by revenue among industrial major categories. In 2025, its PPI weight is about 12.5%. Track storage chip and CPU prices (daily frequency). Since the beginning of this year, DDR5 has risen by about 33%, NAND Flash (64Gb 8Gx8 MLC) has risen by about 33%, and the e-commerce price of Intel Core i7 12th-gen CPUs has risen by about 20%. In addition, using third-party institutional forecasts as supporting clues: in February, TrendForce raised its month-over-month forecast for this year’s Q1 conventional DRAM price from 55% to 90~95%, and raised its month-over-month forecast for NAND prices from 33~38% to 55~60% (concept of average price).

Rationale for selection: Electronic equipment is diverse and non-standardized, so there is no representative terminal product price index. However, storage chips and CPUs are the core components of electronic devices and also account for a very large share of costs among mainstream smart devices (according to Counterpoint estimates, in low-end smart phones, memory will account for 43% of total material costs in Q1 this year, and will rise further in Q2). With high standardization, they are easy to track. Moreover, due to the explosive growth in demand driven by AI computing power, storage chip prices have surged since the last quarter of last year, which is the biggest driver of electronic device price increases this year.

2. Electrical machinery PPI: four types of prices

Electrical machinery ranks second in terms of revenue scale among midstream manufacturing, with a PPI weight of about 8.5% in 2025. Based on the size of the subordinate mid-level industries, we focus on four types of prices:

First is the photovoltaic (PV) industry (power transmission, distribution, and control equipment). Track the PV module price index (weekly frequency). Since 2020, the correlation coefficient between the PV module price index y/y and the PPI y/y for the manufacturing of power transmission, distribution, and control equipment has been about 0.96. Since the beginning of this year, the PV module price index has risen by about 7%.

Second is the lithium battery industry (battery manufacturing). Track the price of battery-grade lithium carbonate (daily frequency). Currently, the mainstream motive and energy storage batteries are lithium batteries, and battery-grade lithium carbonate accounts for about 15-30% of the cost share across different types of lithium batteries. Since 2020, the correlation coefficient between battery-grade lithium carbonate prices y/y and battery manufacturing PPI y/y has been about 0.82. Since the beginning of this year, battery-grade lithium carbonate prices have risen by about 34%.

Third is the wire, cable, and power cable industry. Track copper prices (daily frequency). Copper and aluminum materials account for about 80% of the product cost of wires, cables, and power cables. Since 2020, the correlation coefficient between domestic spot copper prices y/y and the PPI y/y for the manufacturing of wires, cables, power cables, and electrical equipment has been about 0.79. Since the beginning of this year, domestic spot copper prices have risen by about 2%.

Fourth is the home appliance industry (household electrical appliances). Track the average prices of air conditioners/refrigerators/washing machines (weekly frequency). Since 2020, the correlation coefficients between the average y/y prices reported by Ovveyun.com for air conditioners/refrigerators/washing machines and the home electrical appliances manufacturing PPI y/y have been about 0.41/0.38/0.27, respectively. Since the beginning of this year, Ovveyun.com’s average air conditioner price has risen by about 13%. An additional industry price clue is: affected by rising copper prices, some air conditioner manufacturers have successively issued price increase notices from mid-December 2025 to early January 2026, with an increase range of about 2%–12%.

At the company level, referring to Huachuang Securities’ report on the Huachuang home appliance team (“How much do rising copper and aluminum prices affect the profitability of home appliance companies?—Cost shock recap and outlook”), under the impact of rising copper prices, some air conditioner manufacturers have successively released price increase notices from mid-December 2025 to early January 2026, with a price increase range of about 2%–12%. The ability to pass through price increases to address cost pressure also indirectly reflects that manufacturers have strong pricing power and that terminal demand is not weak.

3. Vehicle manufacturing: passenger vehicle average price and qualitative clues

Vehicle manufacturing is the third-largest industry within midstream manufacturing, with a PPI weight of about 8.1% in 2025. Vehicle manufacturing does not offer high-frequency prices that can be tracked, but we can use passenger vehicle market average price (monthly frequency) to make it tangible. Vehicles are highly non-standardized products. Not only the complete vehicle itself, but among vehicle parts, either they are non-standardized or their cost share is not high. Some transaction platforms can collect historical high-frequency prices of popular models, but the representation is limited.

Another “tracking” approach is to observe the marginal changes in industry price expectations. Combining statements from automakers’ executives (Li Bin of NIO and Lu Fang of Leapmotor? indicating “buy a car sooner”—“buy a car sooner”) and experts from the China Association of Automobile Manufacturers (Chen Shihua stating “due to factors such as a large increase in chip and raw material prices, … some companies have already been internally discussing the possibility of raising prices”), as well as policy guidance (Automobile Industry Price Behavior Compliance Guidelines (Draft for Comment)”), and early signs of automaker price increases (earlier this month, Xingtu and FAW Pentium Yueyi 03 announced price increases), this year’s competition on vehicle prices may see a marginal improvement compared with last year.

4. Metal products: steel and nonferrous price

For metal products, the PPI weight is about 3.4% in 2025. This industry uses black and nonferrous metals to process and manufacture various metal components, tools, containers, daily necessities, and parts. Subdivided products are diversified and scattered. From a cost perspective, we can track their price changes via the China steel price index (weekly frequency) and domestic spot copper prices (daily frequency). Since 2020, the correlation coefficient between metal products’ PPI y/y and steel price index y/y has been about 0.75, and between spot copper prices y/y and metal products’ PPI y/y has been about 0.61. Since the beginning of this year, the steel price index has fallen by about 2%.

5. Railways, shipbuilding, and aerospace: newbuild ship price index

Railways, shipbuilding, and aerospace have a PPI weight of about 1.3% in 2025. Track ship prices—specifically, the China newbuild ship price index (monthly frequency, released at the end of the month). Since 2020, the correlation coefficient between the newbuild ship price index y/y and the PPI y/y for railways, shipbuilding, and aerospace has been about 0.63. Since the beginning of this year, China’s newbuild ship price index has risen by 1%. In addition, two additional price indices for secondhand ship transactions can be used for supplementary observation: China ship transaction price index (biweekly frequency, domestic coastal secondhand ship prices) and Shanghai ship price index (weekly frequency; international ships account for 1/3).

6. General equipment, specialized equipment, and instrumentation manufacturing: difficult to make tangible and track

General equipment manufacturing has a PPI weight of about 3.7% in 2025. It mainly produces general-purpose machinery that can be applied across multiple industries. Common examples include: boilers, internal combustion engines, wind power generation equipment, machine tools, forklifts and lifting equipment, pumps, compressors, and valves, bearings, gears, and transmission components, as well as film cameras and cameras, etc.

Specialized equipment manufacturing has a PPI weight of about 2.9% in 2025. It mainly produces mechanical equipment that specifically serves particular industries, specific processes, or scenarios, and has very strong industry attributes. It includes 9 specialized industry segments, accounting for a relatively large share across 4 categories: mining machinery, oil well drilling and deep-sea exploration equipment, earth-moving machinery, engineering cranes, etc. (mining/metallurgy/construction); oil refining and chemical production equipment, plastic and rubber processing equipment, molds, etc. (chemical/wood/non-metal); tractors, mechanized agricultural and gardening machinery, cotton processing machinery, and fishery fishing machinery (agriculture/forestry/animal husbandry/fishery); medical diagnostic monitoring and treatment equipment, ophthalmology equipment and instruments, spectacles, rehabilitation assistive devices, surgical instruments, etc. (medical). The included mid-level industries and their weights are as follows.

Instrumentation and meter manufacturing has a PPI weight of about 0.8% in 2025. Common examples include: industrial automation control systems, electrical measuring instruments, drawing/calculation and measuring instruments, experimental analysis instruments, clocks and timekeeping instruments, and optical instruments.

General equipment and instrumentation are harder to make tangible and track because they cover an extremely large range of product categories, lack representative products, and there are no specific product prices/indices available for tracking. For specialized equipment, the Changsha construction machinery price index (quarterly frequency) can make mining/metallurgy/construction specialized equipment manufacturing prices tangible.

Risk disclosure: The representativeness of the tracked price indicators is limited, and price data collection is incomplete.

Table of Contents

Main Report

Midstream manufacturing is the most certain direction for economic fundamentals this year, and it is also the endogenous driver that brings about a rebound in the PPI. In the coming years, benefiting from technology upgrades and the restructuring of global order that triggers supply panic, China’s midstream manufacturing may enter a strategic era (the era of order restructuring, supply scarcity, and enhanced supply discourse power).

From the PPI perspective, the market can only observe midstream manufacturing’s PPI for eight major categories in terms of month-over-month and year-over-year changes for 66 mid-level categories. And because midstream manufacturing covers products that are overly broad and mostly non-standardized, one problem is that the “price granularity” perceived by the market and the data from the National Bureau of Statistics do not match. Given the importance of midstream manufacturing prices, the core purpose of this report is to select 10 representative prices of typical industries—finished products/core components/raw materials—to make tangible and track the marginal changes in midstream manufacturing prices, as follows:

One: Why focus on the prices of midstream manufacturing?

What is midstream manufacturing? It is the equipment manufacturing industry under the NBS definition, including 8 industrial major categories: metal products, general equipment manufacturing, specialized equipment manufacturing, vehicle manufacturing, railways, shipbuilding, aerospace and other transportation equipment manufacturing, electrical machinery and equipment manufacturing, computer, communications and other electronic equipment manufacturing, and instrumentation and meter manufacturing. Under these 8 major categories, there are 66 mid-level industries.

The impact of midstream manufacturing prices on the PPI is expanding year by year, and is also one of the important factors driving PPI declines over the past three years. With China’s manufacturing sector undergoing structural adjustment and upgrading, and the development of new quality productive forces, we estimate that the weight of midstream manufacturing in the PPI has increased by about 6 percentage points over the past decade to 41%. Because in recent years the contradiction of strong supply and weak demand in midstream manufacturing has been relatively prominent, in 2023-25 midstream manufacturing has dragged down the PPI month-over-month by about 37%.

However, since late last November, following the release of our annual outlook report, we have remained firmly bullish on midstream manufacturing. In the short term, midstream manufacturing is the most certain direction for business cycle momentum in economic fundamentals (see “Where do savings go, and where does spring water flow—to the midstream?—2026 macro outlook report”). In the coming years, benefiting from technology upgrades and the supply panic under the restructuring of the global order, it may usher in a strategic era for China’s midstream manufacturing (see “Striking the ‘midstream’: a cry from supply forces”).

Looking ahead, one baseline and core assumption behind the rebound of the 2026 PPI is that the sustained improvement in midstream manufacturing supply and demand will cause midstream manufacturing prices’ month-over-month decline to stop and stabilize (we have repeatedly emphasized this point in our annual report and earlier price commentaries). This assumption has already been validated. Midstream manufacturing’s demand resilience comes from industrial trends such as electromechanical exports, AI, and new energy, as well as the “two new” policies. Unified market building and capacity governance continue to optimize the supply and competition landscape. Currently, the gap between midstream manufacturing demand growth and investment growth continues to rise. Supply-demand patterns are continually improving. As of February this year, the midstream manufacturing PPI has been rising month-over-month for four consecutive months. The average month-over-month change over the most recent two months has been about 0.4%, which is close to the historical high since 2013 based on comparable data (historical percentile 97%).

Two: How to make tangible and track midstream manufacturing prices?

(A) Computer, communications, electronics: storage prices are the core

The computer, communications, and other electronic equipment manufacturing industry is the largest by revenue scale among industrial major categories, and also the PPI industry with the highest weight. In 2025, its weight is about 12.5%. It includes a total of 9 mid-level industries. The focus is on: computer manufacturing (e.g., computers), communications equipment manufacturing (e.g., smartphones), electronic component manufacturing (e.g., integrated circuits), and electronic components and electronic specialized materials manufacturing. The specific mid-level industries included and their weights are as follows.

High-frequency price tracking in the computer, communications, and other electronic equipment manufacturing industry mainly centers on storage prices. Because electronic equipment is diverse and non-standardized, there is no representative terminal product price index. But storage chips are the core component of all electronic devices and also a component with an extremely large cost share among mainstream smart devices (phones/PCs). (According to Counterpoint estimates, among low-end smart phones with wholesale prices below $200, memory will account for 43% of total material costs in Q1 2026, and will rise further in Q2.) With high standardization, it is easy to track prices. In addition, because of the explosive growth in demand driven by AI computing power, storage chip prices have surged since the last quarter of last year, which is the biggest push behind electronic device price increases this year. DRAM prices have been spiking since September last year, corresponding to the PPI for computer, communications, and electronics stopping its decline and rebounding.

Currently, we can track daily-frequency price data for DRAM and weekly-frequency price data for flash memory. We can also observe daily-frequency CPU prices on e-commerce platforms. Since the beginning of this year, DDR5 (DRAM mainstream for new installations) has risen by about 33%, NAND Flash (64Gb 8Gx8 MLC) (flash memory) has risen by about 33%, and the e-commerce selling price of Intel Core i7 CPUs has risen by about 20%.

In addition, by tracking price forecasts from third-party research institutions as a side reference—for example, in February this year—TrendForce raised its month-over-month forecast for conventional DRAM prices in 2026 Q1 from 55% to 90~95%, and raised its month-over-month forecast for NAND prices from 33~38% to 55~60%.

Note: Storage chips are semiconductor devices used to store data and programs. They are the “memory hub” of electronic devices. The core distinction of storage chips is whether data is retained after power is cut. Mainstream types can be divided into two camps: volatile storage chips (data is lost after power is cut). These chips have fast read/write speeds and are mainly used to handle real-time data while temporary cache devices are running, supporting high-speed computing by the processor—i.e., DRAM (dynamic random-access memory). Non-volatile storage chips (data retained after power is cut). These chips are used for long-term storage. Even when powered off, data will not be lost. They function as the device’s “data warehouse,” i.e., NAND Flash (flash memory). CPU is the central processing unit, the “brain” of electronic devices, responsible for executing instructions, performing computation, and coordinating system operation.

(B) Electrical machinery and equipment: four types of prices

Electrical machinery and equipment manufacturing has the second-highest revenue scale in midstream manufacturing, with a PPI weight of about 8.5% in 2025. This industry is specialized in manufacturing various electrical equipment and instruments such as power generation, transmission and distribution, electricity usage, energy storage, and lighting. It includes 8 mid-level industries. The focus is on: power transmission and distribution and control equipment (such as PV equipment and components), wires, cables, power cables, and electrical instruments and equipment, battery manufacturing (such as lithium batteries/lead-acid batteries), and household electrical appliances (such as refrigerators/air conditioners/kitchen electrics; TVs belong to computer communications electronics), with the specific included mid-level industries and their weights as follows:

Based on four key segments in electrical machinery and equipment manufacturing, we track 4 types of prices.

First is the price in the photovoltaic industry—PV module price index (weekly frequency). Since 2020, the correlation coefficient between the PV module price index y/y and the PPI y/y for power transmission, distribution, and control equipment manufacturing has been about 0.96. Since the beginning of this year, the PV module price index has risen by about 7%.

Second is the price in the battery manufacturing industry, which can be tracked by the price of battery-grade lithium carbonate (daily frequency). Currently, the mainstream motive and energy storage batteries are still lithium batteries, and battery-grade lithium carbonate accounts for about 15-30% of the cost share across different types of lithium batteries. Since 2020, the correlation coefficient between battery-grade lithium carbonate prices y/y and battery manufacturing PPI y/y has been about 0.82. Since the beginning of this year, battery-grade lithium carbonate prices have risen by about 34%.

Third is the price in the wire, cable, and power cable industry, mainly tracking copper prices (daily frequency). Copper and aluminum materials account for about 80% of the cost of wires, cables, and power cable products. Since 2020, the correlation coefficient between domestic spot copper prices y/y and the PPI y/y for the manufacturing of wires, cables, power cables, and electrical equipment has been about 0.79. Since the beginning of this year, domestic spot copper prices have risen by about 2%.

Fourth is the price in the home appliance industry. Mainly track the prices of air conditioners, refrigerators, and washing machines (weekly frequency), and you can use daily-frequency prices of high-sales home appliance products on e-commerce platforms as supplementary observation. Since 2020, the correlation coefficients between the y/y prices of air conditioners/refrigerators/washing machines reported by Ovveyun.com and the PPI y/y for the manufacturing of household electrical appliances have been about 0.41/0.38/0.27, respectively. Since the beginning of this year, Ovveyun.com’s average air conditioner price has risen by about 13%.

At the company level, referencing the report from Huachuang Securities’ home appliance team (“How much do rising copper and aluminum prices affect the profitability of home appliance companies?—Cost shock recap and outlook”), due to the impact of rising copper prices, some air conditioner manufacturers have issued price increase notices successively from mid-December 2025 to early January 2026, with an increase range of about 2%–12%. Being able to pass through price increases to cope with cost increases also indirectly reflects that manufacturers have strong pricing power and that terminal demand is not weak.

© Vehicle manufacturing: passenger vehicle market average price

Vehicle manufacturing, the third-largest industry within midstream manufacturing, has a weight of about 8.1% in 2025. It includes 7 mid-level industries in total. The key ones are: manufacturing of complete vehicles and manufacturing of automobile parts and accessories. The included mid-level industries and their weights are as follows.

In vehicle manufacturing, there are no high-frequency prices suitable for tracking, but we can use the passenger car market average price published by the China Passenger Car Association (monthly frequency) to confirm it. Vehicles are highly non-standardized industrial products. Configurations, powertrains, intelligence features, and safety structures are all designed with differentiation in mind. Not only for complete vehicles, but among vehicle parts, either they are non-standardized or their cost share is not high (unlike the storage chips in computer communications electronics). Some transaction platforms can collect historical high-frequency prices for popular models, but the representativeness is limited (there are too many vehicle categories, and the set of popular models also changes over time). Since 2020, the correlation coefficient between the passenger car market average price published by the Passenger Car Association and the auto manufacturing PPI has been about 0.77.

Another “tracking” approach is qualitative analysis of the marginal change in the auto industry’s price expectation. Under cost pressure and policy constraints, vehicle price competition in 2026 may improve at the margin. First, industry insiders’ statements: Lei Jun of Xiaomi said it is not possible to “increase quantity without increasing price.” Li Bin of NIO and Lu Fang of Leapmotor said to “buy a car sooner.” Chen Shihua, deputy secretary-general of the China Association of Automobile Industry, said: “Due to factors such as a large increase in chip and raw material prices, … some companies have already been internally discussing the possibility of raising prices; some companies have already started to raise prices slightly or tighten discount力度.” Second, policy support: The “Automobile Industry Price Behavior Compliance Guidelines (Draft for Comment)” clearly proposes that, except for special circumstances, there are major legal risks if the ex-factory prices of complete vehicles and parts are lower than their production costs. Third, initial signs of price increases: In early March, Xingtu (Chery) and the Pentium Yueyi 03 (FAW) announced price increases.

(D) Metal products: steel prices and copper prices

Metal products, with a weight of about 3.4% in 2025, is an industry that processes and manufactures various metal components, tools, containers, daily-use items, and parts using ferrous and non-ferrous metals. It includes 9 mid-level industries in total, and the included mid-level industries and their weights are as follows.

For metal products, because the subdivided products are also very diverse and dispersed, from a cost perspective, the price changes can be tracked via the China steel price index (weekly frequency) and domestic spot copper prices (daily frequency). Since 2020, the correlation coefficient between steel price index y/y and metal products’ PPI y/y has been about 0.75, and the correlation coefficient between spot copper prices y/y and metal products’ PPI y/y has been about 0.61. Since the beginning of this year, the steel price index has fallen by about 2%, and spot copper prices have risen by 2%.

(E) Railways, shipbuilding, and aerospace: newbuild ship price index

Railways, shipbuilding, aerospace, and other transportation equipment manufacturing have a weight of about 1.3% in 2025, and includes 9 mid-level industries in total. The included mid-level industries and their weights are as follows.

For railways, shipbuilding, aerospace, and other transportation equipment manufacturing, the price focus is on ship prices—specifically, the China newbuild ship price index (monthly frequency, released at the end of the month). Since 2020, the correlation coefficient between the newbuild ship price index y/y and the PPI y/y for railways, shipbuilding, aerospace, and other transportation equipment manufacturing has been about 0.63. Since the beginning of this year, the China newbuild ship price index has risen by 1%. In addition, there are two price indices for secondhand ship transactions that can be used for side observation: China ship transaction price index (biweekly frequency, domestic coastal secondhand ship prices) and Shanghai ship price index (weekly frequency; international ships account for 1/3).

(F) General equipment and specialized equipment: harder to make tangible and track

General equipment manufacturing has a weight of about 3.7% in 2025. It mainly refers to general-purpose machinery equipment that can be used in multiple industry fields (cross-industry applications). It includes 9 industries in total. The included mid-level industries and their weights are as follows.

For general equipment industry prices, they are harder to make tangible and track. The reasons are: first, there are extremely many product categories covered, and there is a lack of representative products. Second, there are no specific product prices/indices available for tracking. For example, common equipment in this industry includes: boilers, internal combustion engines, steam turbines, wind power generation equipment; various machine tools used for processing metal; transport equipment such as forklifts and lifting equipment; pumps, vacuum devices, compressors, and valves; bearings, gears, and transmission components; film cameras and cameras, etc.

Specialized equipment manufacturing has a weight of about 2.9% in 2025. It mainly refers to mechanical equipment that is specialized to serve specific industries and used in specific processes or scenarios. It has extremely strong industry attributes. It includes 9 specific industry segments of specialized equipment, with a relatively large share across 4 categories: mining machinery, oil drilling equipment, deep-sea exploration equipment, earth-moving machinery, engineering cranes, etc. (mining/metallurgy/construction); oil refining and chemical production equipment, plastic and rubber processing equipment, molds, etc. (chemical/wood/non-metal); tractors, mechanized agriculture and gardening machinery, cotton processing machinery, and fishery catch fishing machinery (agriculture/forestry/animal husbandry/fishery); medical diagnostic monitoring and treatment equipment, instruments and equipment for dentistry, spectacles, rehabilitation assistive devices, surgical instruments, etc. (medical). The included mid-level industries and their weights are as follows.

Similar to general equipment, prices in the specialized equipment industry are also harder to track, but there is a lower-frequency engineering machinery price index (quarterly frequency) that can make tangible the PPI for mining, metallurgical, and construction specialized equipment manufacturing within specialized equipment. This index includes purchase prices for nine categories of engineering machinery products, such as excavating machinery, lifting machinery, and road surface machinery, etc.

(G) Instrumentation and meter manufacturing: harder to make tangible and track

Instrumentation and meter manufacturing, with a weight of about 0.8% in 2025, mainly refers to instruments, meters, control systems, and apparatuses specialized in measuring, controlling, analyzing, and recording various physical, chemical, and biological quantities. It includes 6 mid-level industries. The largest is general instrumentation (industrial automation control systems, electrical instruments and meters, drawing/calculation and measuring instruments, experimental analysis instruments, testing machines, etc.). The included mid-level industries and their weights are as follows.

For specific details, see the report issued by Huachuang Securities Research Institute on March 15, 日 ：《How to make tangible and track the prices of midstream manufacturing?—Strategic Bullish View on Midstream Manufacturing Series Three》.

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