China Nov steel-related manufacturing production index rises 17 points on month

China’s manufacturing production index of steel consumption produced by S&P Global Platts stood at 119 points in November, rebounding from 102 points in October, an uptrend likely to continue into the new year with further domestic stimulus measures on the cards and among expectations of strong overseas demand through the first half of 2022, market participants said.

The production index is based on production data from China’s National Bureau of Statistics for 17 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.

While the index showed month-on-month growth in November, it was still down seven points year on year.

Only production of ships, power generation facilities and containers saw a year-on-year increase in November, while production of machinery, automobiles, home appliances and railway facilities was lower than a year earlier, although they all improved from October.

H1 2022 outlook

Market sources say they expect China’s manufacturing sector to gain more upward momentum in 2022 as further cuts to the bank reserve requirement ratio, or even interest rates, are likely to be announced in China soon, boosting both consumption- and construction-related manufacturing sectors.

Vehicle chip supply tightness is expected to gradually ease in H1 2022, in tandem enabling passenger vehicle sales and production to increase from current levels, mill sources said.

The China Association of Automobile Manufacturers forecasts China’s vehicle output in 2022 to rise 5.4% year on year to 27.5 million units.

Overseas demand for Chinese manufactured goods is also expected to remain strong for much of 2022, until monetary tightening begins overseas, mill sources in China said.

China’s flat steel market is likely to be supported by recovering demand from its manufacturing sectors, at least in H1 2022, mill sources said.

However, concerns remain around plans for tightening monetary policies in the US some time in the second half of 2022, which would not only weaken overseas demand, but also limit monetary stimulus in China’s markets, they said.