China’s Aug steel PMI declines the third month to 47

In August, China’s Purchasing Managers’ Index (PMI) for the domestic steel industry declined for the third month and more substantially by 2.2 basis points on month to 47, as the steel demand fell again after a one-month recovery, according to the latest release by CFLP Steel Logistics Professional Committee (CSLPC) on August 31.

“Sub-indices showed that the steel demand had been declining, steel output had been trimmed accordingly, while raw material prices, already at highs, had risen further…” CSLPC, the authorized index compiler summarized the August steel market performance.

“In September, the demand will probably improve, steel mills’ output will persist high, the raw material costs will be hard to soften, and the steel prices will spiral up,” it added.

For August, the negative impact of the flooding receded, but the steel demand, against the market expectation, failed to improve, as the sub-index for new orders including sales at home and abroad reversed down 2.1 basis points on month to 45.6 for August, or below the neutral benchmark of 50 for the third successive month, according to CSLPC.

“The domestic construction steel demand failed to show any signs of robustness amid scorching and rainy days, though demand for flat steel posted signs of firmness in many products, and flats demand appeared stronger than rebar,” it highlighted.

The sub-index for China’s steel exports orders retreated 8.1 basis points on month to 34.7 in August, as higher domestic prices had limited the room for steel exports, and some overseas steelmakers had been reportedly planning for resumption of operations, the committee explained.

In August, steel mills in many regions of China conducted maintenance, and many trimmed output too on noting the less-than-expected demand recovery, the sub-index for steel production, thus, fell for the second month and more deeply by 5.2 basis points on month to 49.3, back to the contraction zone after having hanging above 50 for the previous four consecutive months.

The average daily crude steel output among the key steel mills was expected to inch down 0.85% on month in August, though it would still be 5.13% higher on year, and the finished steel output may be down 1.67% on month but up 10.93% on year, CSLPC cited the prediction by the China Iron and Steel Association.

By August 20, finished steel inventories at the key steel mills, as a result of lower output, reduced 1.91% from August 10 to 13.7 million tonnes, and the inventories of the five major products at the commercial warehouses in China’s 20 major cities fell 1.9% or 230,000 tonnes from August 10 to 12.2 million tonnes with that of rebar down the most by 180,000 tonnes, according to the CISA figures

Written by Anna Wu, wub@mysteel.com

Edited by Hongmei Li, li.hongmei@mysteel.com