Chinese steel market sentiment is generally unchanged in July from the month before, with domestic orders expected to remain stable, though the outlook for export orders has improved, according to the latest S&P Global Platts China Steel Sentiment Index or CSSI, which showed a headline reading of 27.45 out of a possible 100 points.
The headline CSSI, which measures the combined outlook for new domestic and export steel orders, fell by 1.79 points from 27.45 in June. It was the third consecutive month the index has been below the 50 threshold, with July’s CSSI the weakest since January.
Over the first seven months of the year, the headline index has averaged 43.93 points, compared with 40.02 over January-July 2017.
A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.
Expectations for domestic steel orders deteriorated by 3.92 points from the month before to 27.43 in July. The outlook for export orders recovered from last month’s record low, by 22.80 points to reach 27.77 in July.
The outlook for prices of flat steel, which is mainly used for manufacturing purposes, improved for the second month in a row to 48.02, up by 12.60 from June. The outlook for prices of long steel, which is mainly used in construction, rose by 10 points from June to the neutral level of 50 in July.
The sub-index for crude steel production jumped by 25.89 points to 57.14 in July, while inventories held by steel traders were expected to stay at similar levels to last month, edging up 0.37 to 31.52 in July.
S&P Global Platts China Steel Sentiment Index – July 2018
A figure of over 50 indicates expectations of an increase; under 50 indicates a decrease
“The July index points to a continuation of the market dynamics seen over the past month, with domestic steel orders remaining fairly stable. With crude steel production already at record levels, the prospect of even higher output is a concern, particularly if Chinese mills and traders are obliged to export more because of slower domestic activity in the hotter summer months,” said Paul Bartholomew, senior managing editor of steel & raw materials for Platts.
“However, prices for long and flat steel are expected to rise, which should deter too big an increase in exports, as steelmakers make better margins from local sales. Steel inventories are set to remain low, and hot rolled coil stocks are already at five-year lows, so this will also support steel prices,” Bartholomew said.
The CSSI is based on a survey of 75 to 90 China-based market participants including traders and steel mills. Data is compiled by Platts Asia steel team.
According to Platts price assessments, separate to the CSSI, the Platts China export hot rolled coil price averaged $592.70/mt FOB China in June, up from $588.31/mt FOB in May.
Source: Platts