Is China's steel industry recovering?

According to Reuters, China's steel industry is in a context of increased output but the market is still concerned about low consumption demand as the real estate industry is still stagnant.

According to official data released on Monday (June 17), in May, China saw output reach a 14-month high of 92.86 million tons, up 8.1% from April. and 2.7% higher than last May.

Volumes exceeded market expectations and were due to improved domestic demand and strong exports. Of which, exports of steel products reached 9.63 million tons in May, an increase of 4.5% compared to April and 15.2% compared to the same month last year.

In the first 5 months of the year, China produced 438.61 million tons of steel, down 1.4% over the same period last year.

However, the rate of decline in steel output compared to the same period last year has slowed down because in the first 4 months of the year, output decreased by 3% compared to the same period in 2023.

It is too early to say that China's steel output and demand have changed, especially as the positive picture painted by May data was immediately negated by weakness in the real estate sector. and industry.

Statistics bureau data shows that real estate investment in China in the first 5 months of 2024 decreased by 10% compared to the same period in 2023, continuing a decline of 9.8% in the cumulative 4 months.

Data also shows that new home prices in May decreased by 0.7% compared to April. This is the fastest rate of decline in more than 9 and a half years and marks the 11th consecutive month of decline.

It's not just the real estate sector that is struggling, with industrial output also showing signs of slowing down. The growth rate of this sector in May reached 5.6%, lower than 6.7% in April and did not meet expectations of 6%.

The main manufacturing index also fell in May, at 49.5 - below the benchmark of 50 and lower than April's figure of 50.4.

The real estate market and manufacturing sector remain weak despite China's efforts to introduce growth-stimulating policies such as easing mortgage regulations. It is likely that these policies will take time to produce results.

This means the steel industry's growth numbers are driven by expectations of economic recovery rather than actual demand at the present time.

The price of iron ore futures on the Singapore Exchange ended the trading session on June 17 at 106.55 USD/ton, down from 107.46 USD at the previous close, but still higher than the low. Last week's highest was 105.38 USD on June 11.

Iron ore prices have been trending downward this year after reaching a peak of $143.60 on January 3. There was a time when the price of this raw material for steel production dropped below 100 USD/ton.

China's imports of iron ore increased 7% in the first five months of the year to nearly 514 million tons.

However, much of the increase in iron ore imports has been used to replenish port stocks, which have increased from a seven-year low of 105 million tonnes in October 2023 to a 26-year high. month was 146.6 million in the week to June 14.

The current momentum of China buying more iron ore than needed for steel production is likely to continue in June, with imports remaining high.

According to data compiled by commodity analyst Kpler, China is on track to import at least nearly 100 million tons of iron ore in June.

This number is expected to increase before the end of the month as more cargo is assessed for arrival and unloading.

Vietnambiz