China's Purchasing Managers' Index (PMI) for steel sector slid to 49.3 in June from 50.9 a month earlier, data from the CFLP Steel Logistics Professional Committee (CSLPC) showed on June 30, indicating a slowdown in the pickup momentum in the sector.
The gauge again fell to the contraction zone after exceeding the 50-mark separating expansion to contraction. Sub-indexes showed production kept rising at a fast pace while demand faltered in June.
Since mid-June, south regions have been frequently hit by heavy rains, weighing down construction and thus leading to a lower demand in building materials. The sub-index of new orders declined to 46.4 in June, down 6.5 percentage points from a month earlier, ending the pickup for three consecutive months.
Also, as the Covid-19 virus was still wildly spreading in many countries, global demand for steel products was weak, hitting the sub-index of new export orders down to 31.9, lower than 40 in the fourth consecutive month.
While the adverse weather dampened steel demand, steelmakers remained kept a high capacity in production, mirrored by the sub-index for domestic production up 1.1 percentage points to 57.5, rising for four months running.
Data from China Iron and Steel Association showed key enterprises produced 2.13 million tonnes per day on average in June 11-20, a 2.89% rise from ten days earlier and a 3.05% rise compared with the same period last year.
Due to weak demand and active production, steel stocks at steel plants increased with the sub-index surging 15.1 percentage points to 44.3
By the end-June, stocks of key steel mills surveyed by the CISA rose 5.77% from last session to 14.62 million tonnes in June 21-30.
However, stocks of five major steel products at 20 major cities across the country declined to 12.13 million tonnes as of June 21, down 4.6% compared with ten days ago.
In June, steel prices were mainly on the decline a short-lived rise in early the month. Market data showed the price of Shanghai rebar (HRB 400, 20mm) rose to a year high of 3,662 yuan/t on June 8 from 3,635 yuan/t on June 1, then falling down in a volatile way to 3,611 yuan/t on June 24. Overall, the price was range bound in a narrow range.
Prices of raw materials, however, remained high with the sub index standing high at 67.4. As of June 27, the price of billet in Hebei rose 70 yuan/t from end-May to 3,340 yuan/t; price of Shanxi Grade II rose 200 yuan/t to 1,840 yuan/t; that of 65-66% Fe iron ore fines rose 45 yuan/t to 925 yuan/t.
In July, a slack month for the industry, demand for steel products will continue to fall. Spurred by considerable profits, steel mills will likely to keep production at high levels. Both factors may result in a quicker-than-June decline in steel prices.
(Writing by Alex Guo Editing by Harry Huo)
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