Posted on 21 Mar 2022
China's manufacturing activity and steel demand, while set to continue rising in March and the second quarter, might not exceed levels seen a year earlier due to the domestic COVID-19 outbreaks, a slowing property market and weakening overseas demand, several market participants expected.
hina's manufacturing production index of steel consumption published by S&P Global Commodity Insights stood at 112 points in January-February, up 8 points from the same period of 2021.
The index is based on production data from China's National Bureau of Statistics for 17 steel-related manufactured goods, categorized into seven sectors and weighted according to their share of steel consumption. The monthly production average in 2018 is used as the baseline of 100.
Production of machineries, vehicles, home appliances and power generation facilities saw a year-on-year increase in January-February, but that of shipbuilding, containers and railway facilities were lower than a year earlier.
China's vehicle production was likely to continue rising in the coming months due to recovering demand, especially for new energy vehicles, several market sources said. But the virus outbreaks across the country since early-March have dampened the demand growth and affected some of the supply of automotive chips and batteries, the sources said.
The outbreaks have affected China's retail consumption in general due to restrictions on travel and gatherings, and the impact may continue into April, according to the sources.
In the meantime, China's slowing property market will also undermine the consumption of home appliances while production of construction-related machineries, such as excavators, may continue hovering at low levels in the coming months.
China's shipbuilding would remain strong through 2022 due to the recovering global supply chain, but overseas demand for Chinese manufactured goods had already slowed as production at overseas factories gradually returned to normal.
A few market watchers said manufacturing activity and steel demand in March and Q2 could be weaker than a year earlier also because the sector was quite strong in the first half of 2021, when overseas buying was quite active and the property market was still robust.
Despite sluggish domestic demand, China's steel production has started to increase quickly since mid-March after winter steel output cuts in northern China ended. A few traders expected the rising steel output to weigh on Chinese steel prices in April, adding that the strong steel export orders triggered by the Ukraine conflict could partly offset the downside.
Source:Platts
