Overseas manufacturing decline is a double-edged sword

According to the latest data from The China Federation of Logistics and Purchasing, the global manufacturing PMI in August 2021 was 55.7%, down 0.6 percentage points from the previous month, showing a month-on-month decline for three consecutive months and falling below 56% for the first time since March 2021.

There are two reasons for the continuous decline of global manufacturing PMI. First, the spread of mutated virus led to repeated outbreaks in many countries, which caused impacts on the manufacturing industry and the whole supply chain.Second, some countries are preparing to withdraw their ultra-loose economic policies, weakening the intensity of economic stimulus.It is the above two factors that pressure the world economic recovery trend is gradually slowing down, resulting in the slowdown of manufacturing procurement demand.

It should be said that the global manufacturing index decline, for the Chinese steel market, in fact, is a "double-edged sword".

On the one hand, the decline in PMI means that the growth momentum of the global manufacturing industry is weakening, which is bound to weaken the worldwide steel purchasing demand, leading to the overall steel demand decline rather than increase, which is not good news for The Chinese steel market, especially for external demand.The Asian Development Bank reports that the COVID-19 pandemic has pushed an additional 75 to 80 million people in emerging Asian economies into extreme poverty.If this situation cannot be greatly improved, it is bound to have a direct and indirect negative impact on the Chinese steel market.

On the other hand, the decline of the global PMI purchasing managers index also means that the industrial production of the world except China has been hampered, and the supply chain has been greatly impacted.Data from purchasing managers in different countries and regions in August this year show that the spread of the mutant virus has led to repeated outbreaks in many countries, especially in countries and regions supplying industrial products, and the supply of many manufactured products has been greatly affected.In August 2021, the Manufacturing PMI of India, an Asian country, dropped significantly by 3 percentage points.Malaysia, Indonesia, the Philippines and Vietnam, which have been hit hard by the pandemic, all registered low levels below 50%, while Japan's manufacturing PMI edged down 0.3 percentage points from the previous month.Asian countries, especially some southeast Asian countries, have become important raw material supply and manufacturing processing bases in the world.It is expected that the epidemic in these countries will not be effectively controlled in a short period of time, which is bound to have an impact on the global manufacturing supply chain.

At the same time, due to the better control of the epidemic, China's commodity supply chain continues to be normal, and its status as the "world factory" has been strengthened rather than weakened by the epidemic. As a result, China's commodity export effect has been further enhanced, both directly and indirectly.According to the General Administration of Customs statistics, from January to August this year, the national steel exports of 48.104 million tons, up 31.6% year on year, including June steel exports up 74.5% year on year, July steel exports up 35.6% year on year, August steel exports up 37.4% year on year, strong momentum of growth.It is estimated that the annual direct export of crude steel (steel export translation) reached or approached 70 million tons, an increase of more than 15% over the previous year.Not only that, since this year Chinese steel indirect export situation is also good.According to the General Administration of Customs, China's export of mechanical and electrical products reached 7.98 trillion yuan in the first eight months, up 23.8%, accounting for 58.8% of the total export value.Of which, automatic data processing equipment and its components were 1.02 trillion yuan, up 12.7%;Mobile phones 533.17 billion yuan, up 9.2%;137.7 billion yuan for automobiles (including chassis), up 111.1%.

In addition, according to media reports, at present, the supply of durable consumer goods such as home appliances and automobiles in the United States is tight, and the demand for Chinese goods has increased. Relevant domestic enterprises have full orders, and the indirect export of steel is not small.Shipping costs from China to Europe and the United States have risen sharply this year because of booming export demand.For example, in January 2020, the shipping price of a 40-foot container from Ningbo Port of China to Los Angeles of the United States was more than $1,000. By August 2, 2021, the price had risen to $16,000. On August 15, 2021, the price exceeded $20,000.And a shipper with a September appointment from Shanghai to Los Angeles has already received bids of $25,000 a case.Not only to the United States container quotation rose, for Europe's quotation is also a sharp rise.Surging global shipping costs have also pushed up the price of Chinese-made containers, resulting in a surge in container production and a new demand for steel.

From the perspective of the year's development, the overseas global PMI index could not increase rapidly or even deteriorate due to the difficulty of ending the epidemic in a short period of time, while the supply chain was relatively stable only in China, thus filling the supply gap.As a result, there is a huge substitution effect of Chinese goods, and there are opportunities for Chinese manufacturing industry, especially the huge indirect export demand of Chinese steel.