China's production of key metals in April fell from a month ago, in line with broad weakness in the country's industrial complex, as policy curbs on the property sector, high inventories and monetary tightness weighed steelmaking and copper smelters, National Bureau of Statistics data showed.
The picture of softening commodity production chimes in with sharply lower overall industrial output growth data, which far undershot forecasts and sank to the lowest level since May 2009.
"The economy is even weaker than thought, with industrial production growth back in single digits for the first time since the global financial crisis and electricity production flatlining," IHS Global Insight analysts Xianfang Ren and Alistair Thornton wrote.
Analysts had widely expected the slowdown, arguing that high production levels recently weren't a sign of actual downstream demand but a result of manufacturers competing for market share.
April copper output fell 3.7% to 491,000 metric tons.
Analysts had largely expected an inventory glut to overhang cathode output. Bank of America-Merrill Lynch this week estimated that more than 1 million tons of excess stocks are being stored in the country.
Still, output posted an on-year increase. Output in the first four months rose 8.1% to 1.8 million tons, the bureau said.
April production of several other key base metals also slowed from a month ago.
Zinc production fell to 385,000 tons from 346,000 tons. Tin output fell to 10,967 tons from 13,268 tons. Aluminum and nickel production was also lower.
Crude steel output fell 1.6% to 60.58 million tons.
Downstream steel product production also fell 2.7% to 81.1 million tons.
Still, on an average daily basis, crude steel production reached 2 million tons, slightly higher than last month, which suggests that steel production has maintained elevated levels and not fallen off a cliff.
Steelmakers, including the chairman of bellwether Baosteel Group Corp., warned at a conference this week that new steel capacity was still emerging despite the government's orders.
"Rising Chinese production in the face of weaker spot pricing [is] especially worrisome, as we think the rest of the world will have difficulty balancing supply and demand without production cuts or increased demand in China," Steel Market Intelligence said in a note.
Source: Dow Jones