China’s consumer price index, a main gauge of domestic consumption activity, rose 0.3% on the year but fell 0.1% on the month in May, data from NBS showed on June 12. China’s average CPI over the period of January-May rose by 0.1% on the year.
Some steel market sources said the weak increase in CPI data indicated that sluggish domestic consumption had shown no sign of improvement, which was likely to weigh on the momentum in steel-intensive manufacturing sectors.
China’s passenger car market, a major flat steel consumer, saw retail sales in May reach 1.71 million units, down 1.9% on the year, although still up 11% on the month, according to the China Passenger Car Association.
“I don’t think there is much further upside for domestic passenger car purchases due to stalled household income, while overseas demand for Chinese cars is also likely to shrink in the near future due to possible punishing duties against Chinese new energy cars,” said a mill source in eastern China.
He added that China’s overall vehicle production and its demand for flat steel should remain strong in general in 2024, but their further growth in 2024 and 2025 could be limited.
Meanwhile, market chatter suggested the growth of China’s total yuan loans in May could turn out to be weak, suggesting home buying and corporate investment activity remain subdued.
“The downtrend of the property sector will probably continue into 2025, which will not only continue to dent construction steel demand, but is also a culprit behind stagnant consumer spending and sluggish investment activity in China,” said another market participant in southern China.
Luo Tiejun, vice-chairman of the China Iron & Steel Association, recently said the Chinese steel industry had reached a consensus that demand for Chinese steel had peaked, but how to deal with strong supply but plateaued demand remains a question for the industry.
As end-user demand appeared to be weaker than steel production in June, the Chinese domestic rebar price fell to Yuan 3,680/mt ($507/mt) on June 11, down Yuan 100/mt from end-May and Yuan 279/mt from the start of 2024, Platts data from S&P
