China’s PMIs rebound on returning March demand

The steel PMI increased by 5.6 points from the previous month to 42.2, although still at a historically low level since first compiled in January 2016 by the China steel logistics professionals committee (CSLPC).

China's overall manufacturing rebounded more strongly than its steel sector. The official manufacturing PMI for March rose to 52 from its all-time low of 35.7 in February, China's national bureau of statistics said today. China's economy was the first to suffer from lockdowns in efforts to slow the spread of the coronavirus outbreak. China is now an indicator for other markets as its economy starts to recover, although a growing global economic shutdown is factoring into China's PMI indicators as the coronavirus pandemic spreads.

The steel PMI's new export orders index fell to 15.2 in March from 27.3 in February because of the fast spread of the coronavirus overseas, which has hammered demand and shifted steel sales away from domestic markets to tilt seaborne markets further into oversupply.

The steel production sub-index rose by 8 points to 39.3 from a month earlier, while the new domestic orders sub-index rose by 5.8 points at 38.5.

China's steel production increased in March with resumed steel demand, loosening restrictions on logistics, a rising work restart rate and the gradual completion of mills' blast furnace renovations, the CSLPC said. An indicator of this is China iron and steel association Cisa data that shows its key member mills' steel output averaged 2.5mn t/d in March, up by 1pc on the previous month and up by 2.5pc from a year earlier.

Finished product inventories also dropped quickly at mills amid resuming downstream demand and logistics, with the inventory sub-index in March falling by 15.9 points from a month earlier to 41.6, the CSLPC said.

Steel demand will increase in the second quarter from first quarter under the accelerating progress of infrastructure-focused transportation projects, 5G telecommunications base station construction and inter-city railways, CSLPC forecast. Steel output for all of 2020 is expected to be flat or increase from last year as there are still steel projects to be commissioned, it added. "We expected crude steel output in the first quarter to decrease on a year earlier, but that for the second quarter to turn to positive with relatively sufficient supplies in the market," the CSLPC said.

China's steel export will still face pressure from the pandemic and resulting economic slowdown, the CSLPC said. Two steel producers in Italy have already stopped production, while Tata Steel's European operation plans to cut jobs. More other large international steel mills may cut production later, it added.