China PMI belies steel production strength

The Chinese PMI data for February were taken with a grain of salt given the impact of Chinese New Year.  While the HSBC measure is seasonally adjusted, it is probably difficult to fully capture the impact by just assessing the lower number of working days.

Looking at both January and February, the PMI data would suggest Chinese manufacturing is holding the line after showing a little bit of improvement into year-end. So the improvement in activity at the end of 2012 hasn't followed through into 2013 in a particularly strong way.

While the PMI data are neither here nor there, steel production is unequivocally strong.  The latest CISA data for mid-Feb showed another rise in activity and is very strong for this time of year.

Unsurprisingly stock at steel mills jumped given Chinese New Year.  But the level of stocks are not particularly high relative to previous years, particularly if things like construction and infrastructure spending are on the up.

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