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China’s steel sector PMI strengthens in June

China’s steel sector PMI strengthens in June
Issue Time:2018-07-04

China’s steel sector purchasing managers’ index (PMI) increased by 1 percentage point from a month earlier to 51.6 in June on the back of a rise in domestic and export orders.

But the key steel production sub-index fell by 0.4 points to 52.5, indicating output growth slowed in June compared with May, said the China Steel Logistics Professionals Committee (CSLPC), which produces the index. China’s crude steel output hit an all-time high at 81.3mn t in May, crossing 80mn t/month for the first time, so any gain from June would still take production to a new high. Steel mills increased imports and stocks of raw materials, mainly iron ore and coking coal, in June.

The official PMI for China’s manufacturing sector dipped to 51.4 in June from 51.9 in May, as both the new orders and production sub-indexes slipped.

Steel production growth is likely to slow in July and August because of hot and wet weather in south China and central government environmental inspections in some steelmaking areas, including checks on any resurgence of scrap-fed induction furnaces.

The new domestic orders sub-index grew by 1.1 points from a month earlier to 52.7 in June. New orders increased quickly in the first half of June but growth slowed in the second half of the month as rainy weather in south China hindered construction work. Credit availability to industries has tightened, curbing downstream steel demand, said the CSLPC. The steel market continued to get support from a buoyant real estate market in June.

Steel exports are likely to rise month-on-month in June, as in May, after mills possibly booked more orders in April. Domestic demand for construction steel increased around late April after remaining slow in March and in the first few weeks of April. China’s steel exports are unlikely to drop sharply in the second half of 2018, despite a 25pc duty being imposed on Chinese steel sales to the US, as Chinese exporters expand sales to regions such as Africa and South America.