China's steel industry PMI retreats in September

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The Purchasing Managers' Index (PMI) for China's steel industry stood at 53.7 in September, down from 57.2 in August, according to an industry report, which showed that the sector continues its expansion albeit at a slower pace after stronger-than-expected performance in the previous months.

Data from the China Federation of Logistics and Purchasing (CFLP) shows that a sub-index for new orders declined sharply to 60.6 in September from 66.6 a month earlier, despite September being traditionally a strong month for the steel industry.

"Considering overall demand was quite low in August due to the impact of high temperatures and environmental inspections, the September recovery was not very big. The usual features of the high season have not been obvious," the CFLP said in a statement.

Reuters Photo

Output, overseas order declining

With steel mills in northern China cutting production during the winter heating season, output activities will continue to slow, the report said.

The production sub-index declined to 59.8 from 61.7 in August but still expanded for the eighth consecutive month, while the new export orders sub-index dropped to 40.5 from 45.0 in August, indicating a faster decline in orders from overseas.

Xinhua Photo

Meanwhile, steel prices fell to 4,150 yuan (about 625 US dollars) per tonne from the 4,440 yuan registered last month, according to trading platform Xiben New Line.

China tackles overcapacity in steel industry

As the world's largest steel producer, China's steel industry has long been plagued by overcapacity.

The government has been working to slash steel production capacity by around 50 million tonnes this year in efforts to tackle pollution and curb excess supply.

By the end of July, 85 percent of the target for excess steel capacity has been met through phasing out substandard steel bars and zombie companies.

"With infrastructure and property construction remaining stable, the trend is positive for major steel-consuming manufacturing sectors. Acceleration of construction related to the Belt and Road Initiative may also add new demand for steel," the CFLP report said.

Steel mills in northern China will cut production during the winter heating season so production activities will continue to slow. /Xinhua Photo

"At the same time as winter restrictions on output in North China for environmental protection begin to be implemented in October, supply and demand are both expected to see some softening. Steel market prices are expected to fluctuate at a high level, with some room to increase."

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