China’s Nov steel PMI recovers from 46-month low to 45.4
Source: Mysteel
Dec 02, 2019 14:20
Last month, the sub-index for new steel orders recovered 12.2 basis points on month to 43.8, or having ended the three-month hovering below 40 and having recovered from the nearly four-year low of 31.6 in October, as demand in South China had not been affected much by the temperature drops and downstream users had been accelerating the the progress toward the end of the year.
The improvement in demand was also reflected in the declining in stocks of China’s five major finished steel inventories, as the tonnage in the warehouses of 20 surveyed Chinese cities including those at the ports fell 15.9% on month to 9.9 million tonnes by the end of November, with the decrease pace being much faster than 5.6% month-on-month drop in October.
For November, China’s steel prices stayed on a uptrend with the Shanghai rebar index up from Yuan 3,697/t on November 1 to Yuan 4,128/t on November 25, or the month’s high, and it retreated to Yuan 4,097/t on November 29, which was, nevertheless, relatively high in the past six months or so.
CSLPC warned, though, that steel prices would trend down in the near future given the possible oversupply and declines in demand.
The investment in the infrastructure construction may continue to support domestic steel demand, as China’s Ministry of Finance disclosed on November 27 to grant local authorities a total of Yuan 1 trillion ($142.2 billion) quota for the issuance of government bonds for specific uses to stabilize the national economy in 2020, and Beijing has also lowered minimum capital requirements for infrastructure projects by as much as five percentage points.
At the same time, the decline in steel production may be limited due to the less strict curbing on steel mills than expected and the remaining high margins, CSLPC warned.
Despite the poor air quality forecasts in China’s some regions including East China’s Shandong, Central China’s Henan, and North China’s Shanxi and Hebei since mid-November, the sub-index for steel production still rose by 1.1 basis points on month to 43.4 for November amid profitability, it noted.
Possibly high steel supply, together with the potential softening in demand in December, thus, may distress domestic steel prices, CSLPC concluded.
Written by Anna Wu, wub@mysteel.com
Edited by Hongmei Li, li.hongmei@mysteel.com
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