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Steel users see renewed decline in operating conditions

Christian Fernsby ▼ | January 9, 2020
Demand conditions weakened across the global steel-using industry during December, as latest data showed a modest drop in new orders and subsequent slowdown in output growth.
Industry   Pressure on capacity and input costs remained subdued
As such, the recent recovery in the sector ended with operating conditions declining slightly worldwide.

Topics: Steel

Pressure on capacity and input costs remained subdued, while workforces fell for the fourth month in a row.

Output prices saw a renewed uptick, albeit at only a mild pace.

The seasonally adjusted Global Steel Users Purchasing Managers Index (PMI) – a composite indicator designed to give an accurate overview of operating conditions at manufacturers identified as heavy users of steel – dropped from 50.7 in November to 49.8 in December and indicated a slight deterioration in the health of the steel-using industry.

Moreover, all five sub-components of the headline index (output, new orders, employment, delivery times and stocks of purchases) exerted negative directional pressure, with new orders recording the largest downwards tick.

Output at global steel users increased for the fourth month running in December, albeit with the rate of growth slowing from November.

Regional data showed both Asian and US users raising production levels, with the former recording the faster uplift, while European users reported a further decline in output.

By contrast, new orders at global steel users decreased for the first time in three months during December.

Panellists noted that weak economic conditions continued to weigh negatively on both domestic and foreign demand.

However, the overall decline in new work was only marginal and softer than the average for 2019.

Capacity pressures remained subdued at the end of the year, with backlogs falling fractionally from the month before.

As such, steel users reported further job losses and contractions in inventories of both raw and finished goods.

Most notably, job numbers have now fallen in 15 of the last 16 months, with the latest decline stronger than the average for this period.

Vendor performance was meanwhile relatively unchanged, having deteriorated throughout the prior four months.

Manufacturers thus raised input buying, albeit only slightly.

Input prices ticked up marginally at global steel users in December.

The rate of inflation was the second-slowest for 46 months (faster than October only), with firms noting that prices for steel and other raw materials remained relatively weak.

As a result, selling charge inflation was again subdued.