China’s Manufacturing Crashing, With Demand For Iron Ore Weakening


Image courtesy of [dan] /

Manufacturing continues to fall in China this month, with HSBC releasing its August Flash PMI Index which revealed China Manufacturing dipping below the 50 mark point, to a nine month low.

Picture: (Victor Habbick)

The data reveals a gloomy outlook for China with growth targets falling below target for the first time in almost four years.

Figures compiled by markit reported:

• Flash China Manufacturing PMI at 47.8 (49.3 in July). 9-month low.
• Flash China Manufacturing Output Index at 47.9 (50.9 in July). 5-month low.

Commenting on the Flash China Manufacturing PMI survey, Hongbin Qu, Chief Economist, China & Co- Head of Asian Economic Research at HSBC said:

“Falling orders dragged down the August flash PMI to a nine-month low, suggesting Chinese producers are still struggling with strong global headwinds. To achieve the stated policy goal of stabilizing growth and the jobs market, Beijing must step up policy easing to lift infrastructure investment in the coming months.”

The demand for iron ore was also weakening, with Forbes reporting, ‘steel production was mostly flat in China last month compared to a robust June—up in some measures and down in others.  Daily output, according to one source, was 2.0 million tons in June and 1.99 million tons in July.’

‘The past for Chinese steel is unclear, but the future is certain.  The signs for the remainder of the year are, unfortunately, uniformly bad.  The price of benchmark hot rolled steel has fallen 19% since April.  In the first half of this year, the profits of steel companies dropped 96% from the corresponding period in 2011.’  Forbes

The news of Chinese steelmakers defaulting on obligations to purchase iron ore comes after surveys reported in the Sydney Morning Herald revealed 24% of people surveyed believed the mining boom was well and truly over.

Last week, the worlds biggest miner, BHP Billiton, revealed the company will shelf its plans to develop  the $30 billion Olympic Dam open-pit expansion in South Australia. CEO, Marius Kloppers, said current market conditions including subdued commodity prices and higher capital costs, had led to the decision.