Materials

Global steel-using sector flags steepest downturn since May 2020

Thu 08 Dec 22, 1:02pm (AEST)
Industrial steel worker
Source: iStock

Key Points

  • The US, Asia and Europe all posted declines in output and new orders
  • New orders fell for a fourth straight month and at the strongest rate of decline since May 2020
  • ASX-listed iron ore miners have posted strong gains and still standing tall

The Global Steel Users Purchasing Managers Index (PMI) deteriorated from 49.7 in October to 47.6 in November. The 50-point market separates expansion from contraction.

S&P Global Platts Steel PMI

The indicator is designed to provide "an accurate overview of operating conditions at manufacturers identified as heavy users of steel."

A closer look

"Output in the global steel-using sector fell for the fourth month running in November, and at the fastest rate since May," S&P Global said in a report.

By region

  • Asia posted its sharpest decline for a second time in three months

  • US registered its steepest fall since May 2020

  • Europe posted its ninth successive contraction, but at the slowest rate over the time period

Steel PMIs by region

Price and cost

  • Supply chain pressure increased slightly but below pandemic era trends

  • Input price inflation was little-changed from October's four month high but below long-run series

Demand

  • New orders fell for a fourth consecutive month and at the strongest rate since May 2020

  • Volume of outstanding business rose in November after the first decline in over two years in September

  • Asia is driving all of the volume increase

  • Volumes in the US fell at the fastest pace since June 2020

  • Europe posted a fifth straight decline in outstanding volume

Iron ore miners just don't care

Even against the backdrop of deteriorating steel-making conditions and demand, iron ore spot prices have rallied hard on optimism around China's reopening.

"Iron ore has traded more like a financial asset than a physical commodity due to the influence of bullish forward-looking investment flow," Citi analysts said in a note on Monday.

This has driven some rather powerful rallies for heavyweights BHP, Rio Tinto and Fortescue.

But as share price performance diverges from steel-making business conditions, who's leading who?

Ticker

Company

1-month

3-month

Year-to-date

BHP

BHP

14.4%

27.2%

24.7%

RIO

Rio Tinto

17.2%

26.3%

13.6%

FMG

Fortescue Metals

24.5%

29.4%

7.9%

Data as at 1:00 pm AEDT

 

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Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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