Abstract The domestic steel industry PMI for July came in at 52.5%, marking the second time this year that it has crossed above the 50% threshold, signaling a recovery in the sector during the month. However, despite this positive sign, the continued rise in steel prices throughout July has left the market still in a bullish mood even as August began. Yet, transaction volumes have remained weak, with merchants struggling to move inventory and steel prices showing only a slight upward trend. As a result, it seems that while the PMI rebounded in July, its positive impact on the August market may be limited.
Meanwhile, the official manufacturing PMI for China’s manufacturing sector in July stood at 50.3%, up 0.2 percentage points from the previous month. In contrast, the final HSBC PMI reading dropped to 47.7%, down 0.5 percentage points from June, hitting an 11-month low. This suggests that the downstream demand for steel, particularly among small and medium-sized enterprises (SMEs), remains weak and under pressure.
Although the new orders index for the steel industry reached 57.3% in July, and the new export orders index hit 52.7%, both figures indicate a rebound in market demand. It is clear that the demand from downstream sectors did not weaken during the period of rising steel prices. However, the high temperatures that started in July continued into August, significantly suppressing the release of downstream demand and keeping transactions stagnant.
On the production side, the steel industry’s production index was 52.6% in July, remaining above the 50% threshold, indicating sustained production activity. With the price rebound in July and improved profitability, steel mills resumed operations and increased output, leading to a steady rise in inventories. By the end of July, the inventory of key member companies had climbed to 1,309,500 tons, up 347,000 tons from the end of the previous year and 2.72% higher than the previous month. If these stocks are released into the spot market, supply pressures could surge, which would be unfavorable for further price increases in August.
Additionally, the finished goods inventory index for the steel industry in July was at a low of 33.6%, suggesting noticeable destocking during the month. According to the latest data, the total social stock of five major steel products in 22 cities nationwide fell to 12.369 million tons in July, a decrease of 784,200 tons from the previous month, or 5.96%. This marked the fourth consecutive month of decline, though the rate of decline narrowed compared to the previous two months. Notably, the inventory of cold-rolled coils, one of the five main products, saw a slight increase.
The steel industry's purchasing price index remained high at 63.2%. This reflects the rapid rise in imported iron ore prices in July, which increased by 11.78% in a single month. This surge in raw material costs has pushed up production expenses for steelmakers. Earlier, steel mills raised their ex-factory prices, but the spot market prices remained stable, supported by rising input costs.
Nevertheless, even with cost support, steel prices can only maintain stability. Downstream demand remains sluggish, and transactions continue to be slow, with merchants facing shipping difficulties. If steel mills do not reduce their production enthusiasm, crude steel output will keep rising, worsening the supply-demand imbalance and making any price declines negligible. In the short term, steel prices have already retreated, and steel mills have slowed their ex-factory price hikes. It is expected that the steel market will enter a consolidation phase in the near future.
Meanwhile, the official manufacturing PMI for China’s manufacturing sector in July stood at 50.3%, up 0.2 percentage points from the previous month. In contrast, the final HSBC PMI reading dropped to 47.7%, down 0.5 percentage points from June, hitting an 11-month low. This suggests that the downstream demand for steel, particularly among small and medium-sized enterprises (SMEs), remains weak and under pressure.
Although the new orders index for the steel industry reached 57.3% in July, and the new export orders index hit 52.7%, both figures indicate a rebound in market demand. It is clear that the demand from downstream sectors did not weaken during the period of rising steel prices. However, the high temperatures that started in July continued into August, significantly suppressing the release of downstream demand and keeping transactions stagnant.
On the production side, the steel industry’s production index was 52.6% in July, remaining above the 50% threshold, indicating sustained production activity. With the price rebound in July and improved profitability, steel mills resumed operations and increased output, leading to a steady rise in inventories. By the end of July, the inventory of key member companies had climbed to 1,309,500 tons, up 347,000 tons from the end of the previous year and 2.72% higher than the previous month. If these stocks are released into the spot market, supply pressures could surge, which would be unfavorable for further price increases in August.
Additionally, the finished goods inventory index for the steel industry in July was at a low of 33.6%, suggesting noticeable destocking during the month. According to the latest data, the total social stock of five major steel products in 22 cities nationwide fell to 12.369 million tons in July, a decrease of 784,200 tons from the previous month, or 5.96%. This marked the fourth consecutive month of decline, though the rate of decline narrowed compared to the previous two months. Notably, the inventory of cold-rolled coils, one of the five main products, saw a slight increase.
The steel industry's purchasing price index remained high at 63.2%. This reflects the rapid rise in imported iron ore prices in July, which increased by 11.78% in a single month. This surge in raw material costs has pushed up production expenses for steelmakers. Earlier, steel mills raised their ex-factory prices, but the spot market prices remained stable, supported by rising input costs.
Nevertheless, even with cost support, steel prices can only maintain stability. Downstream demand remains sluggish, and transactions continue to be slow, with merchants facing shipping difficulties. If steel mills do not reduce their production enthusiasm, crude steel output will keep rising, worsening the supply-demand imbalance and making any price declines negligible. In the short term, steel prices have already retreated, and steel mills have slowed their ex-factory price hikes. It is expected that the steel market will enter a consolidation phase in the near future.
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