China's Steel Industry Came Back To Life Last Month

1 August 2016

After a sharp and sudden contraction in June, activity levels across China’s steel industry — the largest in the world — are once again improving.

The latest China Steel Industry purchasing managers’ index (PMI) — released by the NBS in conjunction with the Federation of Logistics and Purchasing – came in at 50.2 in July, well above the 45.1 level seen in June.

Like the better-known manufacturing PMI, the index measures changes in activity levels in China’s steel industry from one month to the next. Anything above 50 signals growth, while anything below that level means contraction.

According to the report, all components within the report expanded in July with the strongest performance coming from new exports orders which surged to 55.7, well above the 51.3 level seen in June.

Domestic orders also rebounded, rising to 50.5 from 43.3.

Elsewhere subindices measuring output, inventories of finished goods and inventories of raw materials came in at 50.1, 52.0 and 52.0, up 7.6, 2.7 and 2.8 points respectively from the levels seen in June.

According to the NBS, the Steel Industry PMI is a composite index that is weighted in the following order: new orders (30%), output (25%), employment (20%), supplier delivery times (15%) and inventories (10%).

Following the release of the July report, released in conjunction with manufacturing and non-manufacturing PMI’s from the NBS, Chinese commodity futures have taken off again, recording some stellar gains in recent trade.

The most actively traded September 2016 iron ore futures contract on the Dalian Commodities Exchange has put on 1.71%, mirroring similar gains in coking coal and rebar futures of 2.04% and 1.15% respectively.


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