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Healthy Feb PMI indicates early signs of green shoots in Chinese economy...

ICICIdirect Research 03 Mar 2023 DISCLAIMER

What's Buzzing 

The official manufacturing Chinese PMI shot up to 52.6 in February 2023 from 50.1 in January 2023. 


Chinese business activity grew more than expected in February 2023 as economic recovery in the country gained momentum after the relaxing of most COVID restrictions. The official manufacturing Chinese PMI of 52.6 in February 2023 was the highest reading since April 2012 and exceeded consensus of 50.6 significantly. 

Our Perspective: 

The better-than-expected PMI signalled a healthy revival of the Chinese economy. The Chinese steel prices has seen an uptick of ~24% over last 3 months and is currently hovering at ~ US$ 675/tonne. Going forward also, over the next few months the PMI numbers are expected to remain in expansion territory, thereby auguring well for the global metal sector. There are also a number of tailwinds that will drive the Chinese economic recovery in the coming months. As Chinese economy has fully reopened after 3 years of Covid restrictions, Consumption is witnessing a recovery. Production is also picking up post the Lunar New Year holiday. The housing market, which is vital for metal demand, is also showing signs revival wherein combined contract sales of the top 100 developers increased by 14.9% in Feb 2023 when compared with Feb 2022. On the Macro front also, policies at the central and local government level have shifted to focus on driving an economic recovery. Traditionally, healthy Chinese economic generally results in a positive rub-off on global metal prices, which augurs well for domestic metal companies. In addition to price hikes taken over last few months, domestic steel companies have further increased the prices by ~ Rs 1200-2000/tonne in early March 2023 to ~ Rs 60000-62000/tonne, thereby auguring well for Indian steel players.

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