• February 8, 2023

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A key economic indicator continues to show weakness in China

Steel production in the second largest economy was down 6.5% in the first six months of the year versus the same period a year earlier, according to World Steel Association data.

That’s particularly bad for China which is bar far the largest steel producer in the world typically making more than a billion metrics tons of the metal a year.

The metal is used in manufacturing and construction. That’s what makes the drop in production this year so worrying for China.

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This century China has become one of the key manufacturing centers of the world. The question is, if the country is reducing its steel output does that mean its manufacturing is suffering as well? Probably it is, although Chinese government stats likely won’t reflect too much weakness.

Another way to look at the Chinese steel situation is to compare it o what’s happening in Russia. Its steel production is down 7.2% over the half year. That’s to be expected. Russia’s economy has been stung hard by brutal sanctions from the west. Its also throwing massive resources into the war in Ukraine.

Under those circumstances, its reasonable to expect that Russia’s steel output would dip considerably.

What’s China’s excuse? The main one would be the COVID-19 lockdowns earlier this year in some key manufacturing centers such as Shanghai. However, that probably doesn’t tell the whole story.

What could also be happening is that post-pandemic western companies will likely be shifting their production from China to other locations including Vietnam, Mexico and north Africa.

So what? This likely means the Chinese economy will continue to weaken.

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