The outlook for new steel orders in China over June deteriorated from May, while expectations for flat steel prices over the coming month was also depressed, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a headline reading of 42.2 out of a possible 100 points. “Market sentiment is extremely pessimistic at the moment due to continued weak demand from domestic end-user segments, such as manufacturing and property construction,” said Paul Bartholomew, Platts managing editor, steel & steel raw materials. “This is expected to put downward pressure on flat steel prices, such as hot rolled coil, over the next month despite slightly higher iron ore input costs.”

The June index tumbled 26 points from May’s 68.2, falling below the 50 threshold after three consecutive months of strong expectations for new steel orders. The outlook for new domestic steel orders dropped 27 points from the previous month to 43.2; while export order expectations softened further by 14 points to 43.9.

The outlook for crude steel production in June also entered negative growth territory, dropping 7.6 points from the previous month to 44.4. The CSSI reflects expectations of market participants for the month ahead. A CSSI reading above 50 indicates an increase/expansion and a reading below 50 indicates a decrease/contraction.

Mills are starting to plan maintenance work at their facilities during the hotter summer months when construction activity slows down,” said Bartholomew. “This is often a de facto way of trimming production when the market is weak, hence expectations of slightly lower steel output in June.”

The monthly Platts CSSI is based on a survey of approximately 50 to 75 China-based market participants including traders, stockists and steel mill operators. The survey of month-ahead sentiment is conducted during the last full working week of each month, with the results published via press release and Platts’ products and services before the 10th of the next month. Platts began tracking steel sector sentiment in China in May 2013.

Separate to the CSSI, the monthly average price for China domestic hot rolled coil as assessed by Platts was $385/metric ton in May, down from $391.5/mt in April.

Platts, Beijing