A couple of months ago some analysts from Credit Suisse took a trip across Asia to conduct a survey of China's steel industry. They later wrote in their report that the sector is in worse shape than it was in 2008. We got a number of e-mails suggesting that this report surely must be erroneous. It turns out that it wasn't.
FT: - Chinese steelmakers saw their profits plunge by 96 per cent in the first half compared to a year ago, a Chinese official said on Tuesday, as the economic slowdown turned the industry into a “disaster zone”.And it doesn't look like the situation is getting any better. In spite of the recent pop in the manufacturing PMI number, key indicators are pointing to a continuing slowdown. The Index of Leading Indicators hit a post-2009 low today,
|China National Bureau of Statistics Leading Indicators Index, 1996=100 (source: Bloomberg)|
... and so did the equity market. China's major cyclical sectors that depend so heavily on double digit growth are in trouble.
|Shanghai Stock Exchange Composite Index (source: Bloomberg)|
Bloomberg: - China’s stocks fell to the lowest level in more than three years amid concern the slowing economy will hurt earnings growth. Foreign-currency denominated B shares dropped for their biggest two-day loss in almost a year.
Chinese steelmakers, including Baoshan Iron & Steel Co. and Angang Steel Co., slid after posting a 96 percent drop in first- half profit. Kama Co. led declines by B shares on concern stricter rules by the exchange may lead to companies being delisted.