China’s steel PMI dives in May

China’s steel purchasing managers’ index (PMI) hit a 16-month low in May amid falling spot prices.

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The index stood at 42.4 points last month, compared with 48.2 points in April, according to data released by the China Federation of Logistics & Purchasing (CFLP) on Monday June 1.

Figures have remained below the 50-point threshold for a thirteenth consecutive month. A reading below 50 denotes a contraction in manufacturing activity.

The sub-indexes of production and new orders in May both fell, showing a slowdown in both supply and demand. The raw materials purchase price sub-index, on the other hand, rose to its highest level in 13 months, according to the CFLP.

China’s domestic steel market continues to trend downward, the CFLP said. However, a “loosening tendency” in monetary and fiscal policies, as well as looking for new ways to manage the country’s capacity issues will keep the market “largely rangebound” in the future, it added.

Spot rebar prices hit a new low of 2,160-2,220 yuan ($353-362) per tonne in Shanghai on Monday. Prices have fallen by over 5% during May.

However, some analysts were cool to the news, noting that the drop was within expectations.

“The lower steel PMI is expected to have little impact on the market, as sentiment has already been relatively weak given that June is a traditional slow season for the steel industry,” a Shanghai-based trader said.

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