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Public Notice

The February steel PMI saw a slight rebound, remaining below the boom-or-bust line for the 10th consecutive month.

Release date:

2018-03-28 00:00

　　According to the index report released on the 1st by the China Federation of Logistics & Purchasing’s Steel Logistics Professional Committee, the domestic steel industry PMI stood at 45.1% in February, a rise of 2.1 percentage points from the previous month—and the highest level in nearly four months—indicating a slight improvement in the overall health of the steel sector. However, the index has remained below the 50% mark, the threshold separating growth from contraction, for the past 10 consecutive months, underscoring that the industry continues to face persistently weak conditions.
 
　　According to analysis, among the key sub-indices in February, the production index remained unchanged from the previous month, while the new orders index and the new export orders index rebounded after hitting bottom. Meanwhile, the finished goods inventory index edged slightly lower from its recent high. These indicators collectively suggest that the overall supply-and-demand situation in the steel industry has improved compared to earlier periods. Combined with expectations of looser policies and seasonal factors, momentum for a recovery in the steel market is gradually building.
 
　　However, due to a significant increase in social steel inventories during the Spring Festival period, coupled with widespread rain and snow across the country after the holiday—which has delayed the start of construction projects—the short-term weak trend in steel prices is expected to persist.
 
　　Cost support in the steel industry has also shown a slight strengthening compared to earlier periods. After three consecutive months of decline, the purchasing price index rebounded sharply in February, climbing 6.3 percentage points from January to 29.8%. However, this index remains relatively low, indicating that the raw materials market is still operating at depressed levels, and its ability to provide robust support for the steel sector remains limited. Looking at recent years, raw material prices typically experience more declines than increases in the period following the Spring Festival. Notably, since 2014, demand for finished steel products has consistently struggled to improve, while the supply of raw materials has remained fairly ample. As a result, the weak dynamics in the raw materials market are unlikely to shift anytime soon. Moreover, if iron ore prices continue to fall below $60 per ton, more non-major and domestically produced mines may be forced to halt operations. This could eventually help stabilize mineral prices at a bottom level.
 
　　The relevant index report indicates that, due to significant increases in both market and steel mill inventories during the Spring Festival period, the imbalance between supply and demand in the steel market is expected to intensify in the short term. Additionally, with cost support remaining weak, steel prices are likely to remain stuck at lower levels. However, starting from mid-March, downstream demand is set to gradually pick up. Meanwhile, easing policies and seasonal peak demand factors may help alleviate supply-demand tensions on a localized basis. These positive developments on the demand side could eventually provide much-needed momentum to the sluggish steel market after a prolonged downturn.

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