CSLPC: China's steel PMI contracts further in Jan

January's PMI marked the second consecutive month for the reading to stay in the contraction zone, highlighting weaker market conditions. Both steel demand and production, along with raw material prices, experienced declines in January which contributed to the overall sluggish performance of the domestic steel market, CSLPC stated.

The sub-index for new steel orders fell in January to 41.7, down from 48.7 in December and reflecting the usual seasonal lull in demand due to the cold winter weather. Additionally, steel demand from end-users such as fabricators and construction companies plunged markedly around the Chinese New Year (CNY) holiday period from January 28 to February 4, the committee observed.

At the same time, the production outlook among steelmakers was also affected by low finished steel demand. The sub-index for steel production dropped by 5.8 percentage points to reach 42.5% in January.

In response to the weaker demand, many domestic steelmakers implemented maintenance stoppages during January. The stricter environmental protection regulations in northern China during the winter season also posed additional challenges to production, CSLPC observed.

Furthermore, the sub-index for procurement prices of steelmaking raw materials fell sharply to 22 in January, down from 29.5 in December. Prices for iron ore, coke, and ferrous scrap all dropped, with metallurgical coke experiencing a significant price decline in the wake of seven consecutive price cuts forced on coke

makers by steel mills during December, CSLPC reported.

Looking ahead, the committee predicted that "China's steel market will require some time to recover after the CNY holiday, with both demand and supply sides likely affected by the lingering holiday mood during the first half of February."

Written by Adele Pan, panqinjie@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com