Here's further proof China's steel industry is in dire straits

Photo: Getty Images

Helping to explain why the spot iron ore price currently sits at the lowest level on record, activity levels across China’s steel industry collapsed in November with the government’s steel industry PMI gauge plummeting to 5.2 points to 37.0.

Like other PMI reports, the steel industry PMI is a diffusion index that measures monthly changes in activity levels across the sector. A reading below 50 suggests activity levels are contracting, so 37.0 is dire.

Fitting with the terrible headline reading, all components came in well below the 50 level that separates expansion from contraction.

Of note, new domestic orders collapsed to just 29.7, well below the already-ugly 37.9 level of October. Elsewhere new export orders rose 1.9 points to 41.2, still deep in contractionary territory, while inventories of finished goods and raw materials printed at 49.2 and 33.4 respectively.

Overall output skidded to 35.4, well below the 43.1 level recorded previously.

It’s an ugly report, particularly for domestic orders, and suggests that China’s construction sector is enduring a particularly difficult time at present.

Given the influx of seaborne iron ore exports coming from the likes of Australia and Brazil, it’s little wonder the iron ore price has fallen by close to 40% so far in 2015.

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