Singapore — The steel purchasing managers' index published by northern China's Hebei province fell 0.4 basis points from the previous month to 47 points, out of 100, in August, indicating the underlying softness of China's steel market. It was the fourth consecutive monthly drop, according to the latest data released by the Hebei Metallurgical Industry Association.
"Overall spot prices of domestic steel showed a downward trend and industry profits remain at a low level. The reasons for this include intensified trade tensions, the lack of downstream demand and the weakening of cost support," the association said.
HMIA vice-chairman Wang Dayong said he expected better supply and demand in September, noting this month is traditionally the peak season when construction activity resumes after the hotter summer months. Steel output cuts ahead of the National Day holiday in China will help limit steel supplies. However, ongoing China-US trade tensions, macroeconomic conditions and high steel inventories are also bringing uncertainties, HMIA said.
The sub-index for new orders in August dropped by 3.6 basis points on the month to 44.2 as most end-users adopted a wait-and-see approach to purchasing, meaning steel sales were lower than expected, the association said.
The sub-index for steel output was up 5.1 points on month to 49.1, while the sub-index for finished steel stocks rose by 1.7 points to 48.2. Inventories climbed due to strong steel production and weak demand. HMIA said market supply still exceeded demand, which would continue to put pressure on steel prices.
Hebei is the largest steelmaking region in the world, accounting for almost a quarter of the world's steel production.