Chinese steel sector thumping along

Macquarie has released its monthly Chinese steel mill survey and it paints a picture of a sector in rude health:

 Opinions on the outlook for the steel and iron ore markets appear to have diverged in line with recent price performance. Steel mills and steel traders are more optimistic in our latest survey than a couple of months ago after prices and margins have continued to hold up. Iron ore traders are increasingly negative, influenced by iron ore prices which recently fell to lows not seen since June 2016. Otherwise the latest survey largely continues the trends seen in recent months, with domestic demand continuing to do well and steel exports still out of favour. There appears a bit more appetite for raw materials restocking this month however, which could help support iron ore and coking coal prices after their recent falls.

 Orders and sales: Steel demand in China continues to hold up well, especially from infrastructure and construction. This continues to goes against the long held expectations from market players that demand would fade into the summer months, as we have been hearing on numerous China trips since Chinese New Year. The healthy demand picture bodes well for steel margins near term, but we continue to look for a slowdown in demand in 2H17 as infrastructure and property investment fade.