China’s steel sector PMI decreases in June amid slack demand

Tuesday, 30 June 2020 11:35:02 (GMT+3)   |   Shanghai

In June this year, the purchasing managers index (PMI) for the Chinese steel sector was at 49.3 percent, down 1.6 percentage points as compared to May, as announced by the China Steel Logistics Committee (CSLC), which is part of the China Federation of Logistics and Purchasing (CFLP). In June, steel production increased further, while demand from downstream users slackened amid rainy weather and floods in the local market.

In June, the production index for the Chinese steel sector increased by 1.1 percentage points compared to the previous month to 57.5 percent, indicating a month-on-month rise for the fourth consecutive month.

Meanwhile, in June the sub-index for new orders in the steel sector saw a drop of 6.5 percentage points month on month to 46.4 percent amid the very rainy weather and floods in China. However, the new export orders index indicated a slight decrease of 0.7 percentage points month on month to 31.2 percent, remaining below 40 percent for the fourth consecutive month as the Covid-19 pandemic spread rapidly worldwide, resulting in slack demand from overseas markets. 

In the given month, due to slack demand from downstream users, the finished steel inventory index increased to 44.3 percent, up 15.1 percentage points month on month.

At the same time, the purchase price index of raw materials in the Chinese steel sector still stood at high levels, though indicating a drop of 1.5 percentage points month on month to 67.4 percent. In June, the production of steel remained at high levels, bolstering demand for iron ore, while supply of iron ore was on the tight side due to the Covid-19 pandemic worldwide.

As for July, CSLC has forecast that steel production will decrease first and then increase later, still indicating a month-on-month rise, while iron ore prices will edge down to some extent amid slack demand in overseas markets, which will result in more supplies arriving in China.

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