China producer inflation cools for first time in seven months on steel glut fears
Prices come under pressure amid concerns that mills are pumping out more than the market wants
China’s producer price inflation cooled for the first time in seven months in March as iron ore and coal prices tumbled, pressured by fears that Chinese steel production is outweighing demand and threatening a glut of the metal later this year.
A renaissance in China’s steel industry has been a major driver of the world’s second-largest economy in recent quarters, helping to generate the strongest profit growth in years and adding to a reflationary pulse being felt across the global manufacturing sector.
But after cranking out as much metal as possible in recent months, Chinese steel mills are now starting to cut prices, threatening to snuff out a bull market that had pushed prices of some steel construction products to their highest since 2014.
China’s producer price index (PPI) rose 7.6 per cent in March from a year earlier, still at an elevated pace but in line with analysts’ expectations and easing from a gain of 7.8 per cent in February, which was a nine-year high, the National Bureau of Statistics said on Wednesday.
Economists polled by Reuters had forecast a softer reading as a torrid rally in China’s commodity markets showed signs of correcting and on expectations that measures to cool the country’s overheated housing market would eventually slow demand for steel and other building materials.
