Green shoots in Chinese steel

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A sub-component of China’s official PMI is the steel PMI. It offers us a useful glance of activity within the steel sector in particular. Like the broader PMI, conditions deteriorated less quickly in September with the headline result a sub-par 43.5 but well up from August’s 39.9:

Moreover, new orders and new export orders both slowed their declines significantly. And better still, inventories of finished goods fell heavily. The inventory cycle is well under way for Chinese steel makers. There’s a small fly in the ointment in the slowing of the depletion of raw material stocks.

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Overall, this shows a sector still in deep rationalisation but it is happening and quite fast. If new orders keep climbing, there may be some semblance of normalcy returned to the Chinese steel sector by year end.

About the author
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.