Singapore — The outlook for China's steel market has fallen to a four-year low, with the seasonally slower period expected to dampen new orders and steel prices, according to the latest S&P Global Platts China Steel Sentiment Index or CSSI, which showed a headline reading of just 12.79 out of a possible 100 points in May.
The headline CSSI, which measures the outlook for new steel orders over the coming month, fell by 12.89 points from 25.68 in April. It was the lowest reading since February 2015, and the third consecutive monthly decrease.
A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.
The outlook for steel prices slumped by 40.96 points from last month to 25.99 in May, the weakest reading since November last year.
More market participants this month believed crude steel production would fall over the next month, largely due to government mandated output cuts in Hebei province to lower emissions. Steel inventories were expected to stay at similar levels to last month, with the measure edging up slightly by 3.88 points.
Index history shows that May and June are seasonally softer months due to the wet weather that affects steel demand and activity in parts of China. The weak outlook for steel prices is slightly surprising given the recent surge in iron ore prices. Most steelmakers doubt their ability to pass through higher raw materials costs to the end customer because of tepid demand and plenty of competition in domestic and export markets.
Surging crude steel production in April has also tempered expectations of robust steel demand and prices over the coming month.
The CSSI is based on a survey of around 50 China-based traders and steel mills.
|Platts China Steel Sentiment Index – May 2019|
|(a figure over 50 indicates expectations of an increase, under 50 a decrease)|
|May||Change from April (points)|
|CSSI (New Orders)||12.79||-12.89|
|Source: S&P Global Platts|
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