From Morgan Stanley on the CISA steel output data I noted this morning, lends more weight to the base case that the output spike is temporary:
Our comments: The pickup in daily production is in line with the Tangshan blast furnace operating rate, which was up 1% from early May. The increase in inventory at mills, while continuing to decline on the distributor side, suggests to us that downstream demand is soft.The heavy rains in many parts of China likely impacted construction demand. Our channel checks suggest that some small mills are considering cutting production dueto therecent declining margins,a result of weak steel prices.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
