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Platts China Steel Sentiment Index edges up to 15.97 points in July, outlook bearish

The outlook for China’s steel market remains extremely bearish, with high steel inventories and subdued domestic demand expected to continue depressing prices in the near-term, according to an industry survey.

S&P Global Platts China Steel Sentiment Index (CSSI) edged up slightly to 15.97 out of a possible 100 points in July, the highest reading since April but still well below the 50 threshold.

The headline CSSI, which measures the outlook for new steel orders over the coming month, rose by 7.55 points from 8.42 in June – which was the second lowest reading since the index began in early 2013. A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.

The outlook for steel prices weakened even further from the previous month, dropping 7.97 points to just 6.25 points in July, the lowest ever reading in the CSSI.

CSSI respondents expected crude steel output to drop slightly in the next month, mainly due to production cuts in northern China’s Hebei province implemented in late June. The index reading for steel production dipped by 4.58 points to 39.66 in July.

The outlook for steel inventories remained high, but fell by 9.75 points from June to 76.79 in July. High steel stocks are likely to put downward pressure on steel prices, particularly if steel production picks up again from August when output curtailments have been lifted.

The CSSI is based on a survey of around 50 China-based traders and steel mills.

Despite weaker steel margins, there has been little talk of trimming steel production – other than for environmental reasons in northern China – among the country’s steel mills. Indeed, China’s daily crude steel production in June rose for a fourth consecutive month, hitting a record 2.918 million mt/day, up 1.5% on the month and 10.0% higher on the year, data released this week by National Bureau of Statistics showed.


Source:Platts

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