China’s manufacturing sector experienced a slight uptick in June compared to May, yet expectations for a modest recovery in demand will likely keep stress on flat steel markets in the upcoming months. According to industry participants, end-user steel demand has been gradually waning since June due to seasonal influences.
They anticipate that any potential recovery in demand during August and September will be limited, placing additional pressure on the flat steel market. The manufacturing purchasing manager index (PMI) for China remained in contraction for the third month in a row, though it improved slightly to 49.7 in June from 49.5 in May.
A PMI reading below 50 signifies contraction. The sub-index for new orders surged to 50.2, indicating expansion, while new export orders stayed in contraction at 47.7.
The production sub-index also showed improvement, rising to 51 in June, as production in equipment manufacturing continued to grow. Nevertheless, output in the ferrous smelting and processing segments remained sluggish.
The declining demand for construction steel is a significant contributor to the weak steel market. Market observers predict that the Chinese property sector, which has yet to see new home sales stabilize, may continue to drag down overall steel demand into the second half of 2025.
Despite a more stable demand from manufacturing, driven by strong exports and domestic consumption policies, growth in manufacturing steel demand may be constrained, particularly in sectors like automobiles and home appliances. The hot-rolled coil (HRC) market in China, a vital indicator of flat steel trends, is expected to remain under pressure due to limited prospects for demand growth and robust production levels.
Production in the medium-thick HRC sector rose by 4.8% year-over-year in the first five months, and further increases are anticipated as more hot strip mills come online. However, if global economic conditions weaken and impact overseas manufacturing exports, HRC prices might struggle to rise.
As of June 30, domestic HRC prices were assessed at Yuan 3,220 per metric ton, a decrease from previous months and considerably lower than the previous year.