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Analyzing China’s January Purchasing Managers’ Index

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China’s January PMI

In January 2018, China’s manufacturing PMI (purchasing managers’ index) was 51.3. The PMI fell from 51.6 in December, which indicates that China’s manufacturing sector expanded at a slower pace. The PMI reading was down compared to Reuters’ poll of economists, which was 51.5. The PMI shows a country’s economic health.

The index remained above 50 for the 17th consecutive month. A reading above 50 indicates an expansion, while a reading below 50 indicates a contraction.

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January Caixin PMI

The Caixin manufacturing PMI shows the outlook for small and private manufacturers, while the official PMI gives more weight to large state-owned companies. The Caixin PMI for January 2018 was 51.5—it remained constant from the previous month. The Caixin PMI was higher than Reuters’ poll of economists, which was 51.3. The Caixin PMI has been above 50 for eight consecutive months.

Oil demand

Why should crude tanker investors keep track of China’s PMI? Manufacturing activities drive the oil demand. As the manufacturing industry expands, the demand for oil increases and vice versa. An increase in oil demand turns into higher oil imports. China mainly imports crude oil using VLCCs. Navios Maritime Midstream Partners (NAP) operates six VLCCs, Tsakos Energy Navigation (TNP) operates three VLCCs, Gener8 Maritime Partners (GNRT) has 22 VLCCs in its fleet, and DHT Holdings (DHT) Holdings has 27. Nordic American Tankers (NAT) doesn’t have a single VLCC in its fleet.

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