China’s flash PMI
Previously, we discussed the trend in the Eurozone’s PMI, or purchasing managers’ index. In this part, we’ll look at some indicators of the Chinese economy. China (FXI) (EWZ) is the largest consumer of aluminum. China is the biggest market for Rio Tinto (RIO), contributing one third to the company’s annual revenues. BHP Billiton (BHP) and Vale (VALE) also rely heavily on Chinese demand.
Investors closely analyze China’s PMI figures. China’s flash PMI fell to 49.2 in April, making a fresh one-year low. China PMI has been below 50 in 2015, barring the exception of February. A PMI below 50 is another grim reminder of the slowdown in China.
Passenger car sales
The previous chart shows the trend in China passenger car sales. As you can see, passenger car sales have been on an uptrend. The rising disposable income in Chinese households is one reason behind higher vehicle sales in China.
China has announced plans to take older vehicles that don’t meet emission standards off the road. This would help increase the demand for new vehicles. Higher vehicle sales in China bode well for the global aluminum industry. The automobile sector is one of the major consumers of aluminum.
Real estate slowdown
Meanwhile, the China real estate climate index hit a fresh low in March. Almost all indicators of Chinese real estate demand have been trending downwards. The construction sector has been a mainstay of the Chinese economy, supporting industries like cement and steel.
The China customs department recently released the trade data for March. China’s exports registered a year-over-year (or YoY) decline of 15% in March. However, China has swung into action, taking measures to boost its exports. We’ll look at how these measures could impact the aluminum industry in the next part of our series.