The outlook for the steel market in China is today the bleakest in several years, as strong steel production, falling new orders and rising inventories combine to weigh on domestic steel companies, according to the latest data from S&P Global Platts.
The S&P Global Platts China Steel Sentiment (CSSI) fell to 8.42 out of a possible 100 in June, the second lowest since the index was first calculated in January 2013.
The CSSI, which measures the outlook for new steel orders for next month, fell 4.37 from 12.47 in May. This was the lowest since February 2015 and the fourth consecutive monthly decline.
A reading above 50 indicates pending increase /expansion, while a reading below 50 indicates a decrease /contraction.
The outlook for steel prices fell 11.77 points from the prior month to 14.22 in June, the weakest since November last year.
Market participants determined the expected volume of crude steel production, which will remain at the level similar to May, next month, but saw that the stocks of metal products are increasing due to lower demand for raw materials. June-August is a seasonally quieter period due to hot weather slowing construction activity and heavy rains in southern China that are holding back demand.
The rise in commodity prices also affected the margin. Platts estimates that many Chinese mills were producing steel in June at cost when the 62% IODEX iron ore benchmark reached $ 112 /t CFR China, the highest since April 2014. Some factories in northern China suffer losses at current price levels.
At this stage, there is no talk of a reduction in steel production at Chinese factories, as most market participants expect Beijing to stimulate the economy in the third quarter by easing monetary policy and investment in infrastructure.
