China’s Primary Market Index (PMI) for steel decreased by 2.3pc in December from the prior month to 43.1pc according to data released by the China Wulian Steel Logistics Professional Committee.

 

The annual average PMI in 2019 has decreased 3.5pc compared to the same period in 2018 to around 47.2pc. The Committee attributed this decline to slower economic growth, and decreasing market supply, demand, and corporate profits.

 

Tight supply conditions have eased, but demand continues to flag according to the Shanghai Zhuo Steel Chain, which indicated that the country’s domestic steel market declined in December 2019 after many construction sites were shut down. The New Orders Index for steel was 36.2pc in December, down 7.6pc from the previous month. 

 

The Export Index, at 35.6pc, is also down 4.5pc from November. Moreover, due to the confluence of tapered steel demand and excess supply, steel prices declined 10pc in December 2019.

 

Steel production for December, however, has remained fairly stable at 44.1pc compared to the previous month with a slight decrease of 0.7pc. The daily crude steel output for December, according to the China Iron and Steel Company, was 19.67mn mt in December, an increase of 0.13pc from the previous month and the Market Production Index was up 1.7pc in December with operation activities of 49.8pc. 

 

The country’s raw material inventory increased 9.7pc to 48.9pc in December compared to the previous month, while its finished product inventory rose 16.6pc to 47.7pc. However, total inventory decreased 8pc to 822mn mt. 

 

Hot rolled coils and cold rolled coils decreased 12.4pc and 4.6pc, respectively, while wire rods and rebar inventory also fell 2.4pc and 8.5pc compared to the previous month. Medium-to-thick plates rose 2.4pc during this period.

 

According to the Bureau of Statistics, crude steel output in 2019 isexpected to be 889.04mn mt, increasing 5.6pc over 2018. However, the growth rate is down 3.2pc compared to last year.

 

Steel demand in China between January and April was very strong because of growth in the real estate and construction industries. From May onwards, steel demand fell in tandem with construction activity. The lower demand for steel also stemmed from a weak automotive sector, which is showed some signs of improvement in Q4. As steel mills stopped buying, the annual purchase volume for 2019 decreased 7pc to 46.1pc, compared to 2018.

 

On the other hand, 2020 looks promising for China’s construction industry, and the steel industry in particular. However, the impact of environmental protections restricting production in 2020 may further weaken the steel industry.

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