China's steel sector contracts further in July
China's steel sector purchasing managers index (PMI) showed further sectoral contraction in July on the back of a slide in output and new orders booking.
The steel PMI in July was lower by 0.3 percentage points from the previous month at 47.9, according to the China steel logistics professionals committee (CSLPC) that produces the index. A score below 50 implies a deceleration in the sector's performance.
The steel production sub-index was lower by 0.6 points at 48.5. The raw materials import index was also in the contraction zone at 46.8.
The new domestic orders sub-index slipped by 2.1 points to 45.8, the third successive month of a contraction in orders booking. Hot and rainy weather in south China blocked construction work hurting steel demand, although the rainy season is now at an end with demand bouncing back, said the CSLPC.
China's official manufacturing sector PMI also remained in the contraction zone for the third successive month at 49.7 in July, although the score was higher than 49.40 in June.
The steel market remains oversupplied that could pressure prices in the short term. The China iron and steel association Cisa put end-July steel stocks with trading firms in 20 main cities at 12.71mn t, a 4.3pc on-month increase, with most increases in stocks of hot-rolled coil and rebar.
Steel demand seasonally slows during June-August before peaking in September and October.
While steel mills face sluggish demand, their profit margins are being pared by the high costs of raw materials, such as iron ore, coking coal, scrap and billet. The raw materials purchase price sub-index was higher by three points in July at 66.5.
The CSLPC expects an increased in imported iron ore arrivals in the short term to ease supplies and pressure iron ore prices.
source: Argusmedia
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