Activity in China's steel industry extended the upward momentum in November with both demand and supply showing signs of further recovery.
The Purchasing Managers' Index (PMI) for the sector reached 49.3 in November, up from 45.8 a month earlier, according to data issued by its compiler CFLP Steel Logistics Professional Committee (CSLPC) on November 30.
A reading above 50.0 indicates growth in sector activity, while a reading below represents contraction.
November's figure picked up for the second month from a low of 43.9 in September, despite in the contraction zone since June, the data showed.
The pickup highlighted a solid demand brought by continued activities in manufacturing, construction and other downstream sectors, even as the traditional busy season has ended.
With recovered investment in infrastructure construction and manufacturing, steel demand kept rising in the first half of November, while the pace slowed in the second half as outdoor works in the north region were affected by snowfall and lowered temperatures, CSLPC said.
But overall, the demand was better than that a month ago. The sub-index for new orders rose by 2.3 percentage points on the month to 47.2.
Steel exports slipped in November with the global demand dented by countries' strengthened restrictions to another wave of pandemic. The reading for new export orders declined 6.1 percentage points from October to 45.9.
Steel production increased in line with growing demand, with the sub-index for production up from 47.1 to 53.3, which prompted the raw material consumption, leading to a drop of raw material inventory sub-index from 40.5 to 38. But steel mills scaled down raw material purchases in anticipation of harsher environmental checks, with the purchasing sub-index down 1.6 percentage points to 47.7.
Steel mills saw a faster decline in inventory of finished steel last month, down 5.1 percentage points from October to 32.2. Data from China Iron and Steel Association showed the inventory of five major types of steel products declined 2.16% month on month to 12.57 million tonnes as of November 20. The most striking decline came from rebar's stockpile, down 750,000 month on month to 3.85 million tonnes, suggesting a risen demand from the construction sector.
Backed with solid demand, the steel market was on a continued rise in November. On November 20, the price of Shanghai rebar (HRB 400, 20mm) hit a year high of 4,207 yuan/t, rising consecutively from 3,833 yuan/t on November 2. Despite a drop in the last few days, the price on November 26 – 4,092 yuan/t – remained 290 yuan/t higher than the month-ago level.
As the steel price has reached a high level, the index compiler expected the market would zigzag down in December, accompanied by falling demand from construction sectors as their activities would be further curbed by adverse weather.
But CSLPC noted demand from automobile and home appliance would have a room to rise further, which could offset part of decline in the construction sector. Therefore, it expected the overall demand for steel would decline a little bit or maintain the current level.
(Writing by Alex Guo Editing by Harry Huo)
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