China’s manufacturing production index for steel consumption produced by S&P Global Commodity Insights stood at 110 points in May, 9 points higher than in April but still down 5 points from the same period of 2021.

         Despite further improvement seen in China’s manufacturing activity in June as it contained a pandemic resurgence, the strength of the recovery has remained sluggish, leading to the recent sharp drop in steel prices, industry sources said.

         The steel consumption index is based on production data from China's National Bureau of Statistics for 18 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.

         In May, the energy sector that includes power generation facilities posted a year-on-year increase, while all other sectors including machineries, vehicles, home appliances, shipbuilding, containers and railway facilities posted year-on-year declines.

         China’s steel demand from the energy sector, including power generation facilities, remained healthy in June, sources said. However, this sector did not show much incremental demand compared with the level of a year ago, the sources said.

         Meanwhile, vehicle production and related auto sheet demand in June was expected to return to or even exceed the level of a year earlier, sources said.

         Rising demand from the vehicle sector is mostly led by China’s vehicle industrial supply chain having almost returned to normal after the pandemic, according to sources. Other factors that aid the sector is delayed demand in April-May shifting to June, and the government offering subsidies to car buyers, the sources said.

         Despite this, China’s vehicle output in May was still 4% lower than a year earlier at 1.993 units.

----Steel Business Briefing