CN Aug steel PMI dips to 53.4 on higher production cost
The Purchasing Managers’ Index for China’s domestic steel industry declined in August, albeit by a tiny 1.4 basis points on month, to 53.4, according to index compiler, CFLP Steel Logistics Professional Committee. Nevertheless, though still in positive territory this brought an end to a five-month run of increases, showing that the sector’s growth pace has slowed down, CSLPC said. The result was still above the threshold of 50 connoting growth, Mysteel notes.
The committee’s latest report published on August 31 said that the rate of increase in steelmakers’ production eased in August, mainly due to the capacity curbs governments have imposed for environmental protection purposes. But contributing too were unfavourable weather conditions during the month typified by high temperatures and heavy rains, while the climb prices of raw materials could also be a major discouraging factor, the committee said.
In parallel, the index for new orders nudged down a tiny 0.6 basis point over the month to 58.1 in August, indicating the weaker market demand from downstream users who purchased products only for immediate use, according to CSLPC. However, market demand will definitely recover as the rainy season in China draws to a close, the report’s authors said.
The dip in demand is also evident from the results of Mysteel’s most recent survey of retail-market inventories of five major steel products in the 35 major cities nationwide. According to the findings, stocks of the five products – rebar, wire rod, hot-rolled and cold-rolled coils, and medium plate – witnessed a small pick-up of 49,200 tonnes on month to 9.96 million tonnes as of August 29.
Throughout the month of August, prices of finished steel products saw a remarkable increase but at the same time, steelmakers had to absorb higher production costs due to the rise in raw materials prices, according to the post.
Indeed, Mysteel’s national benchmark price for HRB 400 20mm dia rebar jumped by Yuan 220/tonne ($32.2/t) or 5.1% on month to Yuan 4,530/t as of August 30. However, its national average price of coking coal surged by Yuan 457/t or 22.7% on month to Yuan 2,482/t including the 16% VAT as of August 30, and the price of 6-8mm HMS grade scrap in Zhangjiagang in East China’s Jiangsu province also gained Yuan 120/t or 5.3% on month to Yuan 2,400 excluding tax on the same day.
For the remainder of this year, according to CSLPC China’s steel industry will perform stronger as it enters a peak season of demand in autumn. It noted that steel prices were likely to climb further as the capacity constraints on steelmakers – caused by environmental equipment inspections in Beijing-Tianjin-Hebei area, the Yangtze River Delta and Fenwei Plains – would have a continuing impact in the long run.
Written by Anna Wu, wub@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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