China | Steel output fell off a cliff in China; industrial gains at 5-month low
Steel output in December dived in China.  Photo: Wikimedia Commons
Steel output in December dived in China. Photo: Wikimedia Commons

Steel sector output in China takes a dive

Chinese factories unexpectedly throttled back production in key sectors from steel, cement and ethylene to sedans in December 2016

January 20, 2017 4:36 PM (UTC+8)

Chinese factories unexpectedly throttled back production in key industries from steel, cement and ethylene to sedans in December 2016, nipping a budding uptrend that had only started in October and smacking headline industrial growth back down to a five-month low.

The culprit evidently lies with the rustic industrial metal of steel, with total value added by the ferrous smelting and processing industry contracting by a massive 13.1% in December, which is more than twice the 6.3% contraction witnessed by the sector during the height of the global financial crisis in November 2008.

The surprise slump in the steel sector poses a stark contrast to the sharp turnaround of China’s Producer Price Index in the second half of last year, reaching 5.5% from minus 5.9% just 12 months earlier. It implies that China’s steel industry is under tremendous pressure from the latest surge in coking coal prices and having difficulties finding a market for the now costlier base metal.

Net-net, while surging commodities delivered additional relief to the mining sector, which saw contraction narrowing further to minus 2.5% from November’s  minus 2.9%, the mainstay manufacturing sector is still in the woods with growth falling back to a multi-year low of just 6.3% in December.

China’s red hot automobile industry remained stellar at its 16.2% growth in December, but easing from November’s 19.5%. The sector produced 1.242 million sedans last month (up 0.6% year on  year) compared with 1.281 million (up 6.4%) in November.

Cement production for December totalled 199.79 million metric tons, down 1.2% from a year earlier and 6.4% less than November’s 213.51 million metric tons.

December industrial production rose 6% from a year earlier, below November’s 6.2% and market expectation of 6.1%. The full year growth of the industrial sector remain unchanged at 6% from a month ago.

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