The Caixin China manufacturing purchasing managers’ index (PMI) sank to 47.8 in July, its lowest point since November 2011. China’s official manufacturing PMI also dropped 0.2 points to 50, indicating no improvement, according to the National Bureau of Statistics (NBS).

The two indicators suggest that the slowdown in China’s manufacturing activity in July was even more pronounced than feared. The Caixin PMI was even lower than a preliminary figure of 48.2 that unsettled markets last week, Kallanish notes.

The official PMI showed a decline in new orders in July after an increase in June, and continued to show that China’s small and medium sized enterprises were the worst hit.

The Caixin index was the most bearish, however. The rapid decline was marked by a sharp decrease in manufacturing output which will impact steel demand in the current quarter.

A weak manufacturing sector will only further undermine flat product prices relative to longs. Hot rolled coil prices in Shanghai are already slipping below commodity rebar prices, and flat steel inventories have been stubbornly high despite production cutbacks.