[ferro-alloys.com]China's two steel industry purchasing managers' indices both rebounded strongly in May amid a ramp-up in demand from the domestic infrastructure and construction sectors as coronavirus lockdown measures eased.

The headline PMI published by CFLP Steel Logistics Professional Committee rose by 5 basis points from April to 50.9 in May. A separate steel PMI published by the Hebei Metallurgical Industry Association rose by 5.2 basis points over the same period to 53.9 points. A reading above 50 indicates expansion and below that, contraction.

The CFLP's sub-index for steel output rose by 3 basis points to 56.4 in May, and for new orders rose by 13 basis points to 52.9. Its sub-index for raw material purchase prices surged by 28.3 over the same period to 68.9 as supply shortages in Brazil exacerbated high seaborne iron ore prices.

Despite this, steel mill margins in China remained healthy. Domestic hot-rolled coil margins averaged $36.27/mt in May, up from $11.28/mt in April, S&P Global Platts data showed. Domestic rebar margins averaged $71.28/mt in May, up from $56.43/mt the month before, on strong demand from the ramp-up of construction activity.

Market participants in Hebei, the world's largest steel production hub, reported an improvement in new orders and said they were seeing the effects of governmental stimulus polices on demand and activity.

Crude steel production at works operated by China Iron & Steel Association member companies averaged 2.06 million mt/day over May, up 6.39% on month and 1.18% higher on year.

CISA said finished steel stocks stood at 14.88 million mt May 20, down 2.54 million mt on month. However, the level was still considered high and may put pressure on prices in June, a seasonally slower month for steel demand due to wet weather in southern China.

Market prices may be supported by a plan by Tangshan city in Hebei province to order mills with poorer environmental performances to trim production by 20%-50% in June to reduce air pollution. Some 29 out of 32 steel mills in Tangshan will be affected by the output reduction.

However, mills in the city said they had received more environmental inspections recently but did not expect production to be notably lower in June than in May.

(S&P Global Platts)

• [Editor:王可]