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.
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.