China’s macroeconomic indicators showed a downward trend in the first half of the year

China’s macroeconomic indicators continue to show a downward trend in January-June this year: 5 out of 9 parameters showed a decline in the first half of the year. It is reported by BigMint.

Steel production continued to decline in the country, while investment growth in the manufacturing industry remained stable, but investment in infrastructure declined year-on-year. Despite stimulus measures, the degradation in the real estate sector is still deepening. According to the National Bureau of Statistics, the country’s GDP grew by 4.7% y/y in the second quarter (April-June), but this growth was slower than the first quarter (+5.3%).

Steel production fell in the first half of the year amid declining profitability of steel mills. In January-June 2024, this figure decreased by 1.1% y/y – to 531 million tons. The reasons are the continued downturn in the real estate sector and low domestic demand, which is squeezing margins, reducing enthusiasm for sustainable production levels.

The industry’s revenues for the six months were down 3.3% y/y, while operating expenses were down 2.9% y/y. Many steel mills have shut down their blast furnaces to start repair work.

In addition, China is preparing to meet its decarbonization targets. In total, 22 of the country’s 34 provinces have outlined appropriate measures to limit air pollution in key sectors, including steel.

This comes after the State Council issued an action plan aimed at improving air quality and promoting the green agenda late last year. In addition, 15% of steelmaking capacity has not yet reached the benchmark level in terms of energy efficiency.

Imports of iron ore to China are supported by the need to replenish stocks. In January-June, this figure increased by 6% year-on-year. Prices for Fe62% fines imported by the country remained stable year-on-year at $118/t CFR, which further supported purchases. In addition, steel exports remained stable, keeping demand for raw materials relatively high.

Steel exports are growing amid weak domestic demand, up 24% y/y in the first half of the year to about 53 million tons. However, June volumes fell by 9% m/m.

Domestic steel demand in China is shifting from construction to machinery and infrastructure. The country is increasing its indirect exports, with more than 50% of exported goods being machinery, components and other goods related to steel products.

According to BigMint, there are signs of potential improvement in demand for rolled steel in the country, but overall steel production is likely to decline in the second half of 2024 due to the continued impact of market conditions on company margins. The industry is waiting for more sustainable demand growth before it can increase production. In addition, steelmakers must take into account the requirements for the energy transition. Further stimulus measures, such as lower interest rates and bank reserve requirements, are expected to support demand.

However, China’s struggle to maintain economic balance means greater instability in global markets, so the short-term economic outlook looks uncertain.

As GMK Center reported earlier, the growth of Chinese exports is leading to a drop in global steel prices, and the country’s increasing production capacity threatens emerging economies.