Steel PMI index does not rise and fall, steel market confidence has fallen, no drop

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Abstract On June 1st, the reporter learned from the Steel Logistics Professional Committee of the China Federation of Logistics and Purchasing (hereinafter referred to as the China Federation of Materials) that although the Chinese manufacturing PMI rose to 50.8% for three consecutive months in May, the steel industry PMI index does not. Rise and fall, down 6 from last month...
On June 1st, the reporter learned from the Steel Logistics Professional Committee of the China Federation of Logistics and Purchasing (hereinafter referred to as the China Federation of Materials) that although the Chinese manufacturing PMI rose to 50.8% for three consecutive months in May, the steel industry PMI index did not rise. The counter-reduction was 6.2 percentage points lower than the previous month.

China Federation of Materials believes that the PMI of the steel industry shows that the overall situation of the domestic steel market is sluggish, the contradiction between supply and demand is prominent, the sales pressure of steel enterprises is unprecedentedly increased, and the cost is seriously weakened by the support of steel prices. In addition, due to the reduction of production and maintenance of steel mills, steel prices at historically low levels have fallen, and there is limited downside.

Supply and demand contradictions still stand out

On June 1, the data disclosed by China Material Association showed that the steel PMI index in May fell by 6.2 percentage points from the previous month. The data also shows that since September last year, the steel industry PMI index reached the expansion range of more than 50% for the first time in April this year, and returned to the contraction interval again in May.

In fact, the PMI index of the steel industry has once again contracted, which is related to the sharp contradiction between supply and demand in the steel market in May and the high inventory pressure.

China Federation of Materials pointed out that in the steel industry PMI sub-index, the new orders index for the steel industry in May was 45.8%, a sharp drop of 12 percentage points from the previous month. After continuing to rise to the expansion zone in the first two months, it fell sharply to within the contraction zone in May.

“This shows that under the situation of sharp drop in steel prices and tight capital, agents and end users are more cautious in ordering orders from steel mills. The traditional agency system for steel sales has gradually disappeared, and the sales pressure of steel companies has increased.” Senior researcher Qiu Yuecheng told reporters.

According to the data of China Steel Association, in early May, the key sales statistics of iron and steel enterprises were 14.162 million tons, and the average daily sales were 1.416 million tons, down 28.9% from the previous day.

China Federation of Materials said that under the situation of a sharp drop in investment growth and a deep adjustment in the real estate industry, the domestic steel market demand improvement in May was limited, and it was still sluggish compared to the same period last year.

For the latter period, China Federation of Materials believes that considering that the East China region will usher in the hot summer rainy season in June, the terminal demand will shift to the traditional low season, and the downstream demand will weaken in June.

Under the sluggish downstream demand, steel companies' stocks continue to be high. According to the steel inventory data of the key steel enterprises of the China Iron and Steel Association, the steel stocks of the key statistical steel enterprises at the end of mid-May were 14.998 million tons, an increase of 700,000 tons or 4.9% over the previous ten days. The current inventory of steel companies still increased by 1.317 million tons compared with the same period of last year, an increase of 9.6%.

“The data shows that the destocking of the steel market is still going on, the loss of the function of the steel traders' reservoirs, the shift of inventory pressure to steel enterprises is more obvious, and the pressure on steel enterprises is increasing.” Qiu Yuecheng believes.

Steel price downside or limited

Due to the economic downturn, banks tightening credit and many other negative factors that pervaded the steel market, market confidence was out of balance, resulting in a decline in domestic steel prices in May. However, China Federation of Materials believes that due to the weakening of steel price support factors and the expected decline in crude steel output, steel prices have fallen below historical lows, and limited downside space.

The data showed that due to the serious contradiction between supply and demand and the sharp drop in the price of minerals in May, the current steel prices fell sharply to a new low.

As of May 30, the Nishimoto Shinkansen steel index closed at 3,220 yuan / ton, down 140 yuan / ton from the end of last month, a month-on-month decline of 4.2%, a year-on-year decline of 4.17%, hit a new low since October 2006.

The sharp drop in steel prices has a greater relationship with the fall in iron ore, the cost factor that supported steel prices in May.

According to the reporter, this year's imported ore prices have seen two rounds of decline. Among them, the price of imported iron ore fell to US$105/ton on March 10, down 22% from the beginning of the year, and then rebounded slightly; the price of imported iron ore fell again in mid-April, and the decline in May accelerated. The quotation fell to $91.5/ton on the 30th of the month, a 32% drop from the beginning of the year, and only one step away from the low of $88.5/ton on September 6, 2012.

“June is at the end of the second quarter and the end of the second half of the year. The pressure on the steel mills should not be underestimated. Due to this, the purchase of raw materials for steel mills will continue to be cautious, and the price of raw materials will continue to weaken in the later period. Will still be weak." Qiu Yuecheng told the "Daily Economic News" reporter.

According to the statistics of China Steel Association, the domestic crude steel output has remained at a high level this year. The average daily output of crude steel in February, March and April was 2.217 million tons, 2.266 million tons and 2.295 million tons respectively, which has reached a record high for three consecutive months. .

Starting from the middle and late May, domestic steel mills saw an increase in production and maintenance due to the decline in profits and the upcoming off-season, and the operating rate of steel mills declined slightly.

According to the statistics of China Steel Association, the average daily output of crude steel in key steel enterprises in the middle of May was 1.801 million tons, down 1.3% from the previous month. This is the first time that the output of key steel enterprises has declined for the first time. It is expected that the average daily crude steel output in May will fall slightly from the historical high in April, which will play a certain role in slowing down the steel price.

China Federation of Materials said that from the above situation, the current domestic steel market fundamentals are still sluggish, and the pattern of “supply of strong demand and weak” is still intensifying. Under the situation of tight capital and insufficient cost support, steel prices are difficult to be optimistic in the later period. . However, the current domestic steel prices have fallen to historical lows. As steel prices continue to fall, market confidence has reached the bottom of the decline, and price downside is limited.

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