In March this year, the purchasing managers’ index (PMI) of China’s steel sector decreased to 44.6 percent, sharply down 14.3 percentage points compared to the previous month, as announced by the China Steel Logistics Committee (CSLC) which is part of the China Federation of Logistics and Purchasing (CFLP).
In March, China’s steel sector PMI fell back into contraction, i.e., below the 50 percent mark, indicating the weak situation in the Chinese steel market.
In March, the new order index for China’s steel sector decreased from 63.2 percent in February to 41.3 percent. Meanwhile, in the given month the production index for China’s steel sector also decreased sharply, falling to 45.7 percent, having reached its highest level of the past two years in February this year.
The raw material inventory index and the purchase volume index also fell back into contraction in March. Since mid-March, many Chinese mills have started overhauls, while low profitability also forced certain mills to reduce production.
In the month of March, the export order index for China’s steel sector also fell into the zone of contraction after four consecutive months of rebound, indicating difficult export market conditions for Chinese mills.
Over the month of March, Chinese import iron ore prices declined by almost $20/mt. Meanwhile, semi-finished steel spot prices in the Chinese steel market also decreased below cost level. Currently, Chinese mills do not have a great desire to purchase iron ore due to weak steel sales and fluctuations in raw material prices. As a result, prices of iron ore are expected to soften in the days ahead.
Market players state that at present the Chinese steel market faces significant pressure due to the increase of supply, the sharp rise in crude steel output, and weak downstream demand caused by postponement of certain projects. In the coming period, the imbalance between supply and demand may be diminished a little because of increases on the demand side; however, high finished inventory may restrict the recovery of steel prices.