In August this year, the purchasing managers index (PMI) for the Chinese steel sector was at 44.9 percent, down 3.0 percentage points as compared to July, as announced by the China Steel Logistics Committee (CSLC), which is part of the China Federation of Logistics and Purchasing (CFLP).
The supply-demand imbalance due to continuing high levels of production and the faster decline in demand contributed to the drop in the steel sector PMI. In August, the production index for the steel sector increased by 1.6 percentage points compared to the previous month to 50.1 percent, which signals that output started to increase slightly compared to the negative trend in July. Meanwhile, in August the sub-index for new orders in the steel sector saw a decline of 8.3 percentage points month on month to 37.5 percent, with this sub-index remaining below 50.0 for the fourth consecutive month, with steelmakers receiving insufficient orders due to high temperatures and many rainy days in August.
In the given month, the finished steel inventory index increased to 46.7 percent, up 3.0 percentage points month on month, rising for the fourth consecutive month. At the same time, the purchase price index of raw materials in the Chinese steel sector stood at 34.7 percent in August, indicating a decline of 31.8 percentage points month on month, dropping back below 50.0 having risen during the previous four months.
As for September, demand for finished steel in China will improve as more construction activities will be implemented as the weather becomes less hot, thereby pushing up finished steel prices. However, the CSLC urged market players to take countermeasures as the approaching mid-Autumn Day (September 13-15) and National Day Holiday (October 1-7) will likely exert a negative impact on supply and demand in the steel market.