In February this year, the purchasing managers' index (PMI) of the steel sector in China’s Hebei Province decreased to 38.1 percent, down 9.6 percentage points month on month, as announced by the Hebei Province Metallurgical Industry Association (MIA). In the given month, the trend of the steel sector PMI in Hebei Province was in line with that for the whole of China, which decreased by 10.5 percentage points month on month to 36.6 percent.
In February, the overall new order index for Hebei Province’s steel sector stood at 30.4 percent, down 14.2 percentage points compared to the previous month. In the given month, demand for steel from downstream users slackened significantly due to the extended holiday period resulting from the outbreak of the coronavirus. In the given month, downstream industries, including construction, machinery, automobile, shipbuilding and home appliance industries, postponed their resumption of production, resulting in a drop in demand for steel.
In the given month, the production index for Hebei Province’s steel sector was at 38.3 percent, down 10.2 percentage points month on month. Due to the extended holiday and insufficient transportation capacity, raw materials were in short supply and so steelmakers in Hebei Province reduced their outputs.
At the same time, the inventory index for finished steel in Hebei Province increased to 62.4 percent, up 9.9 percentage points month on month. In February this year, construction sites halted their activities, resulting in slacker demand for steel, contributing to the rises in inventories of steel.
In addition, the raw material inventory index for the steel sector in Hebei decreased to 28.2 percent, down 22.3 percentage points month on month. Inventory levels of raw materials decreased due to the blocking of transportation of raw materials amid the coronavirus and increasing freight charges.
Wang Dayong, vice president and secretary general of the Hebei Province Metallurgical Industry Association, said that the main problems for the steel industry were postponement of demand, disrupted transportation, rising inventory of finished steel, decreasing inventory of raw materials, financial tightness and shrinking profitability. He urged steelmakers in Hebei Province to reduce steel outputs, maintain reasonable inventories, and build up certain stocks of raw materials, as part of efforts to achieve a brighter future in March.