China saw its steel sector flourishing throughout the month of May. In fact, the activity in this industry reached a new peak over the last year. The main agent that rushed production was a new surge in orders. This incentive managed to boost the performance of top producer in the world.
Despite Impressive Evolution, Chinese Steel Sector Expects Lower Activity in Summer
On the other hand, the Chinese steel sector presents several risk factors. The market shifted to shaky grounds as prices reached record high values. The China Federation of Logistics & Purchasing (CFLP) warned the industry of difficult times ahead. At the same time, analysts expect a drop in demand with the start of summer. This season is mostly dedicated to recreation. Therefore, there are fewer construction projects than the rest of the year.
At the moment, China delivered half the world’s supply of steel. Over the month of April, the country topped its production with record volume of materials. At the same time, Beijing asks companies and manufacturers to slow down on production and ease down on surplus supply.
Shipbuilding, Excavators, and Bulldozers Are in Great Demand
The Purchasing Managers’ Index also known as PMI climbed from 49.1% to 54.8% in May for the steel sector. CFLP notified a contraction point which appears the moment an industry advances beyond the 50-point threshold. On top of that, data revealed that the new orders index climbed 13.6 points to 60.5, which is a record level since May 2016. CFLP stated that the moment prices rebounded, traders received more orders than usual.
“Sales are good while steel firms are seeing more orders.”
During the first quarter of 2017, shipbuilding demand rose 72% which was in tune with a surge of sales of bulldozers and excavators. However, the market is going through some risky times given that margins for steel mills reached record levels.
While summer is at the door, the construction activity is usually slowing down. Moreover, China has rivals fiercer than ever in Ukraine, Russia, Turkey, and Iran.
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