Yahoo Finance Are Chinese Steel Demand Indicators Really That Bad?
A Deeper Dive into May 2016 Steel Industry Indicators
Chinese steel demand indicators
Since China (FXI) is the largest steel consumer, it’s wise for investors in companies such as Companhia Siderurgica Nacional (SID), POSCO (PKX), Gerdau (GGB), and TimkenSteel (TMST) to keep track of Chinese steel demands. In this part of the series, we’ll look at the Chinese real estate, automobile, and manufacturing sectors.
The Chinese automotive sector
Looking at China’s automobile sector, we see that in the first four months of 2016, 7.4 million passenger cars were sold in China. That’s a YoY (year-over-year) increase of 6.6%. However, China’s official manufacturing PMI (Purchasing Managers’ Index) fell to 50.1 in April, from 50.2 in the previous month.
Chinese real estate data disappointed
Purchasing land is generally a prerequisite before building can occur. The land area purchased by Chinese real estate enterprises for future developments has fallen more than 6.5% YoY in the first four months of 2016. However, the pace of decline narrowed by 5.2 percentage points if we compare it with the first three months of the year.
The floor area under construction by real estate development enterprises has risen by 5.8% in the first four months of the year. The rate of growth is similar to the first three months.
In the first four months of this year, building sales have increased by 55.9% YoY in China. New construction starts have also risen by 21.4% YoY in the first four months after steadily declining for two years, as you can see in the graph above.
China’s investment in fixed assets also rose by 10.5% YoY in the first four months of the year. The growth rate fell 0.2 percentage points over the first three months.
Notably, although China’s real estate and fixed investment data missed consensus estimates, they aren’t all that bad. Steel prices in China have corrected steeply in May. We’ll cover this in detail later in the series. But before that, let’s see how US steel demand indicators are looking this year.
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