NDRC: China's bullish steel sentiment cools in April, but support remains

The bullish sentiment evident in China's steel market in March is expected to experience a slight softening in April, though upward momentum remains unabated, according to the latest steel sector survey released by the National Development and Reform Commission (NDRC) on April 11. The survey covered major wholesale steel markets in South China, Shanghai, and Tianjin.

The assessment examined six key indices, revealing marginal declines in both the Sales Price Expectation Index and the Purchase Price Expectation Index for April - a sign of cooling optimism in the domestic steel market.

The NDRC has assessed the Sales Price Expectation Index at 65.74% for this month, lower by 8.8 percentage points from March, while it positions its Purchase Price Expectation Index lower by 4.76 percentage points at 66.07%.

Despite the predicted month-on-month declines, both indices remain well above the 50% threshold, indicating continued – albeit moderated – expectations for price increases. This sentiment is mainly underpinned by the seasonal demand recovery and strong consumption outlook among end-users, the report noted.

The robust market expectations were also reflected in the NDRC's Sales Volume Expectation Index at 75.46%. While this was a drop of 9.73 percentage points from March, it still stood significantly above the neutral 50% mark.

Inventory levels are projected to fall further in April on the back of firm demand, according to the report. The NDRC puts its Inventory Expectation Index lower at 39.81%, down by 1.86 percentage points from last month.

NDRC also pointed out that stronger gains in purchase prices compared to production costs could help lift profit margins for steel producers. The Sales Profit Margin Expectation Index for April is higher at 64.35%, a slight increase of 0.92 percentage point from March, while the Sales Cost Expectation Index falls further to 56.02%, down by 8.79 percentage points.

Looking ahead, NDRC anticipates that production control policies in the steel industry may gradually come into effect in April. These, coupled with the seasonal demand typically seen during the traditional "Silver April" period, point to market sentiment remaining cautiously optimistic. Nonetheless, the commission cautioned that external factors such as rising overseas trade friction and weaker-than-expected production restrictions could pose risks to the outlook.

Written by Adele Pan, panqinjie@mysteel.com

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