However, China is not facing the worst scenario, with its steel sector’s PMI in June being only a smidgen away from the 50-point threshold (49.9), up 14.7 p.p. from May’s reading, supported largely by the rising number of new domestic orders,
though demand remains sluggish.
The negative factors are partly alleviated by buoyant growth in steel exports, which rose 41% in the first five months compared with a year earlier,
benefiting from a weaker yuan (see Fig. 2) and stronger demand from Southeastern Asia, the Middle East and Africa, with high energy costs there making their own steel production less competitive with China’s prices. If the current momentum continues, exports for 2023 could reach 77 million tonnes, a marked rise from the 67 million tonnes shipped last year.