The Kabul times, Afghanistan Trustable News Agency.

Sliding demand for steel points to a slowdown in China’s economy

By: The Kabul Times

A hint of China’s economy slowing after the spectacular growth spurt which followed last year’s Covid-19 slowdown has been detected in demand for steel.
Orders placed with steel mills for long products such as girders and reinforcing bar, as well as flat products used in appliances and vehicles, have slowed according to a survey of mills and traders by an investment bank.
There’s a lot of steel in China. Photo by Yan Xin/VCG via Getty Images. VCG via Getty Images
Macquarie, the Australian-based bank which conducted the survey, said mills and traders reported slower growth in orders, particularly from flat-steel consumers.
“Mill capacity utilization dipped slightly over the past month, but remains comparatively elevated despite thinner (profit) margins,” the bank said.
Steel production is closely watched by the Chinese Government which has become concerned about high prices and their effect on manufacturers.
International mining companies also keep a close on steel demand because it ultimately determines demand for raw materials such as iron ore and coking coal.
“Early Signs Of Slowing Demand”
The bank said its survey had detected “early signs of slowing steel demand”, though there also appeared to be a level of inconsistency in one aspect of the survey, a decrease of raw material inventories.
Macquarie said the declining stockpiles of iron ore and coking coal was consistent with other indications which pointed to low levels of raw material stocks in China.
Whether steel mills have deliberately allowed their stocks to run down because of a recent surge in prices is unknown but the bank said Mysteel, a specialist commodity intelligence service, estimated that steel mill raw material stocks were at an 18-month low.
Coking Coal Inventory “Dangerously” Low
Coking coal inventory was said by Mysteel to have reached “dangerously” low levels in certain parts of the country due to faltering domestic and Mongolian supply.
Not mentioned by Macquarie is a Chinese Government ban on importing Australian coal, a market distorting event which has played a role in driving the coking coal price to more than $300 a ton for the first time in four years.
Iron ore, which is not subject to any bans, has also risen to a near-record level of $220/t despite threats from the Chinese Government that hoarders and speculators risk punishment if found to be manipulating the price.
Australian mining companies have been major beneficiaries of Chinese demand for iron ore and coal and will be closely watching the latest developments in China’s steel industry.
Macquarie said a measure of market sentiment which attempted to measure the level of optimism or pessimism in the steel industry had turned “less positive” over June, perhaps reflecting the traditionally weak summer season for steel demand.
“The number of mills seeing domestic orders rise has declined this month,” the bank said.
“Export demand also appeared to be softening as the impact of value-added tax changes introduced earlier in the quarter start to be felt.”
Macquarie said iron ore and coking coal inventory declined over the past month with steel mills showing a weaker appetite to buy more in the coming weeks, possibly as a consequence of lower profit margins and production expectations.

Related posts

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

The Kabul times, Afghanistan Trustable News Agency.