The outlook for new steel orders and steel prices in China rebounded strongly in August on the back of improved expectations for domestic demand over the next month, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a headline reading of 55.1 out of a possible 100 points in August.

“The government’s order to cease construction work in Beijing from August 20 to ensure clear skies ahead of the Victory Day parade on September 3 has sparked a bout of steel restocking from end-users,” said Paul Bartholomew, Platts managing editor, steel & steel raw materials. “Larger mills have also tried to stop spot prices falling by raising their floor prices. These factors saw the outlook for long steel prices increase considerably in August though sentiment last month was particularly bleak. Whether any recovery is sustainable remains to be seen as demand in China’s property construction sector is constrained by an oversupply of empty apartments in the country.”

The August index rose 28.6 points from July’s 26.5, giving a reading above the 50 threshold for the first time since May. The outlook for new domestic steel orders increased by 26.4 points to 56.9 in August, while export order expectations for the month ahead improved slightly to 34.6.

The most notable reading in the latest index was the big jump in expectations for prices of long steel products, rising 53.4 points from the previous month to 70.0 in August.

The outlook for crude steel production over August fell by 15 points to just 35.0, while expectations for steel stocks held by traders rose for the fourth-consecutive month to 47.6.

“Weak market conditions have forced some mills to trim output and there is talk the government will ask mills close to Beijing to stop producing ahead of the military parade, which is why respondents anticipate lower steel production this month,” said Bartholomew.

Platts, Beijing