China’s steel PMI rises in November

China's steel sector purchasing managers' index (PMI) rose on the month in November to 45.4 on an increase in output and demand, but a score below 50 indicated that the sector was still in contraction.

The steel PMI, compiled by the China steel logistics professionals committee (CSLPC), was last at 50 in May and had fallen every month since, before rebounding last month.

November's steel PMI was higher by 4.1 points from October. The steel output sub-index climbed by 1.1 points to 43.4, while domestic new orders sub-index gained by 12.2 points to 43.8.

A rebound in demand last month increased the willingness of steel mills to produce more steel and purchase more raw materials, said CSLPC.

China's real estate demand has remained robust through the year and supported steel prices in November, with supply tightening on slower steel shipments from north to south China as strong winds at northern ports disrupted operations.

The country's overall manufacturing PMI also showed an uptick, rising above the 50 mark for the first time since April to 50.2 in November from 49.3 in October, said the national bureau of statistics.

New construction starts are accelerating and will provide a driving force for demand of steel and other bulk materials, said the CSLPC. It also said that the government is easing further the financing rules for infrastructure projects, which will support steel demand "to some extent".

But the supply pressure could be higher this year than in 2017-2018 as local governments in major steel-producing provinces such as Hebei, Shandong, Shanxi and Henan might not impose winter production cuts on mills and instead rely on production restrictions during periods of higher concentration of pollutants, said the CSLPC. Several mills in these regions already adhere to ultra-low emissions standards, while many non-compliant mills have been shut down, making such winter production cuts less necessary.

There may not be much extra effort to restrict steel output in December, said the CSLPC, which should keep output rates high as mills are mostly profitable.

By Prasenjit Bhattacharya

source: Argus Media