China’s steel PMI for March is out and there’s quite a lot to chew over. First, the headline figure crashed an astonishing 14.3 points to 44.6. Even for a volatile index that’s pretty wild movement:
Moreover, the leading components fell even further, new orders fell a gob-smacking 21.9 points. And new export orders almost as hard. Given we’re supposed to be moving into the higher demand periods for steel that’s not altogether comforting. Not surprisingly, steel inventories surged. On the upside for iron ore, raw materials inventories fell heavily.
China has a big seasonal bounce in steel production in the first few months and then give back so some of this is normal. But these movements are so huge that they do suggest that demand is not what was expect from the Chinese recovery only a month or two ago.
However, the movements are so crazy that I’d advise using the three month averages. From these we might conclude that the peak in steel production and demand growth is already in and that moderate raw material demand still looms ahead. Thus the release largely confirms what we already know.
