S&P Global Platts China Steel Sentiment Index Softened in December

Price Outlook Remained at High Level, Domestic Orders Seen Softening

Beijing - December 28, 2016

Chinese steel market sentiment softened slightly in December but expectations for long and flat steel product prices remained extremely buoyant, according to the latest S&P Global Platts China Steel Sentiment Index (CSSI), which showed a headline reading of 52.62 out of a possible 100 points.

The December CSSI dropped by 6.75 points from November on a weaker outlook for domestic steel orders, which fell 7.86 points from last month to 53 in December. The outlook for new export orders reached a four-month high of 48.14 in December, up 6.05 points from last month, but staying below the neutral 50 threshold.

A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.

Expectations for long and flat steel product prices came off record highs in November, with longs falling 25 points to 75 in December and flats dropping 6.25 points to 79.17 in December.

The outlook for steel production edged up 6.35 points to 54.35 in December. This measure has stayed in the 46-55 point range since August. There was a big increase in the outlook for steel inventories held by traders, with the sub-index rising 23.77 points from last month to 63.77 in December, its highest level since June.

“Steel prices remain elevated because of high raw materials costs rather than strong underlying demand,” said Paul Bartholomew, senior managing editor of steel & raw materials for S&P Global Platts. “Producers and traders of flat steel products have experienced reasonable margins and were more positive about the December period, whereas their outlook for long steel products has been less rosy. Reinforcement bar (rebar) has seen volatile futures trading, with expectations of production cuts over winter priced in by investors.”

S&P Global Platts China Steel Sentiment Index – December 2016

(a figure over 50 indicates expectations of an increase; under 50 indicates a decrease)

December 2016 Change from November (points)
CSSI (Total New Orders) 52.62 -6.75
New Domestic Orders 53 -7.86
New Export Orders 48.14 6.05
Steel Production 54.35 6.35
Flat Steel Prices 79.17 -6.25
Long Steel Prices 75 -25
Inventory Held By Traders 63.77 23.77

Steel market participants expected a similar level of steel production in December, said Bartholomew. He said some survey respondents forecasted a drop off in domestic orders, which is why trader inventories are tipped to rise. Meanwhile, other respondents believed some pre-Chinese New Year restocking will support prices.

The CSSI is based on a survey of 75 to 90 China-based market participants including traders and steel mills. Data is compiled by Dai Yuelin, Sharon Liao, Zhang Jing, Lucy Tang and Joy Zhuo in Shanghai.

According to S&P Global Platts price assessments, separate to the CSSI, the Platts China export hot rolled coil price assessment in November averaged $449.77 per metric ton (mt), free on board (FOB) China. This was up 14% on $393.815/mt FOB in October.

China Steel Sentiment Index History (points out of 100)
China Steel Sentiment Index History (points out of 100)
Source: S&P Global Platts

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