China's Purchasing Managers' Index (PMI) for steel sector rebounded 3.2 from a 17-month low a month earlier to 45.0 in September, showed data from the China Steel Logistics Professionals Committee (CSLPC), as steel prices rebounded and material costs declined amid ongoing production curbs under the country's double control on energy consumption and intensity.
Yet the figure was still below the 50-point mark, which separates growth and contraction.
The index for steel production was logged at 46.0, rebounding 2 points compared with August, fueled by a pickup of demand in the start month of the typical peak demand period, yet it was still in the contraction zone for the third straight month, mainly as the country imposed measures to rein in crude steel production to ensure the whole-year output no more than the 2020 level and limit energy consumption and intensity.
Over September 11-20, the daily crude steel production at member steel mills of the China Iron and Steel Association fell 7.18% compared with ten days ago and was down 6.08% compared with the year-ago level to 2.03 million tonnes. Daily output of pig iron and steel products also declined, CISA data showed.
The decline in production also dragged down the demand of raw materials. The index for purchase volume stood at 39.7 in September, the second month that the reading has been below 40.
However, the purchase price index rebounded by 3.9 to 51.6 in September, with the decline of iron ore prices not able to offset the surge in coke prices.
Buy prices of iron ore has extended a downtrend in September, down 60% from a peak in the past three months, mainly as demand from China was scaled back by steel production curbs. Coke prices, however, continued rising in the first half of the month due to the surge in short-supplied coking coal, and then hovered at high levels in the remainder of the month.
September saw a significant increase in demand. The sub-index for new orders gained 7.4 to 39.0, although the figure was still in the contraction zone.
The sub-index for new export orders stood at 39.5% in September, below 40 for the third straight month, affected by the factors, including the decline in steel production, pickup in domestic demand and constraint in exports after China removed export rebate and raised export tariffs on some steel products.
Steel prices were shored up by the steel production curbs. Shanghai rebar climbed from 5,211 yuan/t on September 1 almost all the way up to 5,798 yuan/t on September 27, data showed.
It is expected that the steel supply will continue to be restrained as the "double control" is unlikely to ease in October and the target to limit the annual crude steel production would remain unwavering.
Demand would still be restrained due to the control over real estate and shortage of chips.
During January-August, the areas of new construction fell by 3.2% year on year and the areas of land purchased by real estate dropped 10.2%.
(Writing by Emma Yang Editing by Tammy Yang)
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