May steel PMI data fall back

After two consecutive months of rising in March and April, the steel PMI released in May returned to the downward trend. On the 1st of this month, according to the latest data released by China Iron and Steel Federation's Steel Logistics Professional Committee, the PMI index of the steel industry once again fell to 46.4% in May, falling 6.2 percentage points from April and returning to the contraction range.

According to the analysis, the conflict between supply and demand in the domestic steel market is currently outstanding, and the ore cost support is weak, and the steel plant sales are “pressing big”. However, there are also views that with the macro-level stabilization and recovery, steel prices may usher in the opportunity to bottom out.

The fundamentals are weak, steel prices have turned sharply After the Spring Festival this year, the domestic steel market has gone through a wave of warmer prices.

Subsequently, the domestic steel PMI index also rose for the second consecutive month, accompanied by the peak season of the "Golden Three Silver" industry. Among them, the April steel PMI soared by 8.4 percentage points from the previous month, and it has returned above 50% of the Yurong line for the first time since September 2013.

However, the long-term outlook was not long. Under the environment of overcapacity and weak demand, the weakness of the fundamentals caused the steel price to lose its driving force for continued growth. In the middle of last month, the domestic steel price began to turn sharply. As of yesterday, the domestic steel comprehensive index has fallen to around 3,200 yuan/ton, and it has fallen more than 200 yuan/ton since the beginning of April.

In the eyes of people in the industry, the steel price “diving”, double the pressure on business operations, and the sharp decline in steel trading and circulation in the market are the main reasons that lead to the appearance of “Waterloo” in the steel PMI in May.

According to the research report of China International Iron and Steel Federation, in the PMI sub-index of the steel industry in May, the purchase price index fell sharply to 26.1%, which was 20.0 percentage points lower than that in April and fell to its lowest level since September 2012. At the same time, the new orders index was 45.8%, a sharp drop of 12.0 percentage points from the previous month, indicating that the enthusiasm of market transactions and downstream traders getting goods to the "freezing point."

The traditional agency function has disappeared. "After late April, steel prices have been weakening, the supply and demand pattern is difficult to change, steel products are piled up in factories, and inventory has risen for more than a dozen weeks. The company's sales pressure is high." A steel factory in Shandong The manager told the reporter.

Senior analyst of steel Qiu Yuecheng said that after April, the unfavorable factors of the recent “inflection point” of fixed asset investment and the downstream real estate market have weakened the demand for steel products on the one hand, and on the other hand also severely depressed market confidence, eventually leading to steel prices at 5. The month "crashes."

Qiu Yuecheng believes that from the fundamentals of the industry, some steel mills in May have begun to gradually reduce production due to financial pressures and imbalances in market supply and demand. The contradictions between supply and demand in the steel market will be slightly eased. "The domestic steel market is still at the bottom of recent years, regardless of spot prices or prices, and there is little room for further decline in the future. If there is a change in the macro level in the second half of the year, steel prices may rebound slightly."