The steel purchasing managers' index released by Hebei province in northern China fell 0.4 basis points from the previous month to 47 points out of 100 in August, indicating major weakness in the Chinese steel market. It was the fourth straight month, according to the latest figures released by the Hebei Iron and Steel Industry Association.
“The overall spot prices for domestic steel have shown a downward trend, while the industry's profits remain low. Reasons for this include increased trade tensions, lack of downstream demand and weakening cost support, ”the association said.
HMIA Vice Chairman Van Dyong said he expects supply and demand to improve in September, noting that this month has traditionally been the peak season with construction activity resuming after the hot summer months. Cutting steel production ahead of China's national holiday will help limit steel supplies. However, continued trade tensions between China and the US, macroeconomic conditions and high steel inventories are also creating uncertainty, HMIA said.
The sub-index on new orders in August fell 3.6 basis points over the month to 44.2 as the majority of end users adopted a wait-and-see approach to purchasing, that is, steel sales were lower than expected, the association said.
The sub-index for steel production rose 5.1 points month-on-month to 49.1, while the sub-index for finished steel inventories rose 1.7 points to 48.2. Inventories rose due to strong steel production and weak demand. HMIA says market supply still exceeds demand, which will continue to put pressure on steel prices.
Hebei is the largest steel region in the world, accounting for nearly a quarter of the world's steel production.
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