China's manufacturing expands in Nov, may face 2025 export challenges

China's manufacturing activity expanded for the second straight month in November, but the trend could decelerate in 2025 due to potential challenges for exports, market sources said Dec. 2.

The country's manufacturing industry purchasing managers' index increased to 50.3 points in November, from 50.1 points in October, data from the National Bureau of Statistics showed. A reading above 50 indicates expansion.

The PMI's sub-index of manufacturing production increased to 52.4 points in November, from 52 points in October.

New orders in November were higher at 50.8 points, compared with 50 points in October. New export orders remained in contraction at 48.1 points in November, improving from 47.3 points in October.

New orders for general-purpose equipment and vehicles, in particular, were strong, both at above 54 points in November.

Some market sources said domestic stimulus improved consumer spending on certain goods, such as cars and home appliances. Strong exports of mechanical and electrical equipment, including vehicles, also led to an improvement in manufacturing production and new orders.

A trade source indicated that some overseas demand has been accelerated into the fourth quarter of 2024, potentially to circumvent any trade tensions between China and the US in 2025, when Donald Trump assumes the presidency. As a result, "new orders of China's manufactured goods may slow again in the first quarter of 2025," the trade source said.

Other market participants expected China's exports of steel and manufactured goods to remain strong at least in the first half of 2025 but warned of uncertainty around global trade in the second half of the year.

Export support

Strong steel and steel-intensive goods exports may continue to support the domestic steel market, and Chinese steel prices could fluctuate around current levels through December, according to market sources.

In the first 10 months of 2024, China's hot-rolled coil exports rose 40.6% on the year to 28.89 million mt, data from S&P Global's Global Trade Atlas showed. Meanwhile, the dollar value of mechanical and electrical product exports increased 6.9% on the year to $1.739 trillion during the period, according to China Customs.

"Thanks to strong exports, China's flat steel inventories are currently at low levels," said a mill source. "So, as long as steel mills continue to keep their production under control, steel prices are still likely to rebound in early 2025 when seasonal demand recovers amid low steel inventories."

China's HRC inventories, an indicator of the flat steel market, have been declining since mid-August in major spot markets monitored by the China Iron & Steel Association.

The inventories fell 9.5% from the end of October and 33.2% from mid-August to 1.71 million mt as of Nov. 20, CISA data showed. The HRC inventories as of Nov. 20 were down 3.9% on the year.

Platts, part of S&P Global Commodity Insights, assessed Chinese domestic HRC prices at Yuan 3,500/mt ($481/mt) on Dec. 2, up from Yuan 3,430/mt in late November but lower than Yuan 3,570/mt on Nov. 5.