China’s monthly manufacturing steel demand slowed quickly in April after rebounding in March. Weakness in the manufacturing sector is likely to continue in May to July, due to the low season and the drag of a further slowdown in the property sector.

          China’s manufacturing production index of steel consumption produced by S&P Global Commodity Insights stood at 110 points for April, up from 96 points a year earlier, but down from 134 points in March and also lower than 130 in the same month of 2021.

          The production 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 April, due to a low base factor, manufacturing of machineries, vehicles, shipbuilding, home appliances and power generation facilities all posted an increase, but containers and railway facilities still posted a year-on-year decrease, according to the NBS data.

          China’s manufacturing and construction activity largely slowed in April 2022, when a large number of Chinese cities were under COVID-19 lockdowns.

          The container manufacturing production in April still fell sharply by 44.4% year on year, indicating the export market for manufactured goods remained on a downward trend, which will add to the downward pressure of a languishing domestic market on steel demand probably throughout 2023, some steel market participants said.

          Meanwhile, the sectors of machineries, vehicles, shipbuilding, home appliances, power generation facilities and railway facilities all posted month-on-month declines in April.

          China’s production of excavators (an indicator of construction-related machineries) and passenger cars (an indicator of the consumer spending market) both fell sharply in April, by 42.8% and 22.6% respectively, month on month.

          “The poor excavator production indicates China’s construction activity and related steel demand may remain in a downtrend for the foreseeable future," a mill source said. "Steel demand in passenger car sector is likely to improve sometime in the second half of 2023 thanks to policy support and a boom in electric vehicle consumption, but the rebound is likely to be modest.”

          Some market sources said a deterioration in the property sector in April suggested the sector had yet to hit the bottom. “Property is a crucial credit generator to drive economic growth," one market watcher said. "The sector’s slowdown has not just undermined construction activity, but also hit household income and consumer spending.”

          On high steel production but languishing end-user demand, Chinese domestic hot rolled coil prices, an indicator for manufacturing-related steel, fell by Yuan 550/mt ($78/mt), or 12%, from mid-March to Yuan 3,930/mt on May 17, S&P Global data showed