China's Economic Climate Improves, While Steel Industry Continues Contraction
Time:2025-12-31 16:43:34 Source:
On December 31, 2025, China's National Bureau of Statistics released the Purchasing Managers' Index (PMI) figures. The data shows that in December, the manufacturing PMI, the non-manufacturing business activity index, and the composite PMI output index were 50.1%, 50.2%, and 50.7%, respectively, representing increases of 0.9, 0.7, and 1.0 percentage points compared to the previous month. All three major indices returned to expansion territory, indicating an overall improvement in China's economic climate.
I. Overall Positive Performance in Manufacturing and Construction Sectors
For the manufacturing sector, the PMI stood at 50.1%, rising above the critical threshold for the first time since April. Among the 21 industries surveyed, 16 saw their PMI increase month-on-month.
Both the production and demand ends of the manufacturing sector showed significant recovery: the production index was 51.7%, and the new orders index was 50.8%, rising by 1.7 and 1.6 percentage points respectively from the previous month. Notably, the new orders index entered expansion territory for the first time since the latter half of the year.
However, industries such as non-metallic mineral products, smelting and pressing of ferrous metals (i.e., the steel industry) still had their production and new order indices below the critical point, indicating continued pressure on these sectors.
The construction sector showed particularly clear improvement in its activity level.
Driven by factors such as higher-than-usual temperatures in some southern provinces and accelerated work progress by enterprises ahead of the holidays, the construction business activity index reached 52.8%, an increase of 3.2 percentage points from the previous month. The construction business activity expectation index remained high at 57.4%, reflecting sustained optimism among enterprises regarding near-term industry development.
II. Steel Industry: Weak Supply and Demand, Contraction Continues
In contrast to the general recovery in the overall economic climate, the steel industry's operations tightened further. According to data released by the Steel Logistics Professional Committee (CFLP), the steel industry PMI for December 2025 was 46.3%, a decrease of 1.7 percentage points month-on-month, remaining in contraction territory.
Persistently Weak Demand: Domestic market demand remained sluggish due to low temperatures. The new orders index fell to 45.4%, down 3.5 percentage points month-on-month, marking the fifth consecutive month in contraction. Export demand also remained under significant pressure, with the new export orders index dropping sharply by 6.1 percentage points to 41.1%, a significant decline for the second consecutive month. This was primarily attributed to the completion of overseas Christmas order deliveries, low manufacturing sentiment in major economies like Europe and the US, and the international trade environment.
Continued Production Slowdown: The combination of declining demand and intensified environmental production restrictions during the heating season led to a further decrease in the production index by 2.3 percentage points to 43.7%, marking a second consecutive month of decline.
Slight Price Rebound: Although indices for raw material purchasing volume and purchase prices both declined, steel prices experienced a modest rebound. This was supported by a combination of factors including supply contraction outpacing demand reduction, continuously declining inventory levels, and positive macro-economic expectations. The finished goods inventory index was 46.1%, down 3 percentage points month-on-month, continuing its contraction trend.
Looking Ahead, the steel industry is expected to continue exhibiting off-season characteristics in January 2025. Demand is forecast to remain weak, steel mill production is likely to maintain a contraction trend, raw material prices are expected to decline further, and steel prices may fluctuate at low levels.
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