S&P Global Platts China Steel Sentiment Index Collapsed in June

BEIJING, June 12, 2016 /PRNewswire/ -- Sentiment in China's steel market collapsed to a 16-month low, with most market participants expecting new steel orders and prices to weaken further over the next month, according to the latest S&P Global Platts China Steel Sentiment Index (CSSI) for June, which showed a headline reading of just 15.92 out of a possible 100 points.

The June index dropped 31.06 points from 46.98 in May, the weakest reading since February 2015 and the third consecutive monthly decline since March's record of 89.42. A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.

The outlook for new domestic orders for steel over the coming month dropped by 30.94 points from May to 16.26 in June, while expectations for new export orders fell by 32.43 points to 12.01, the weakest ever reading for this measure.

Price expectations for long steel products, such as rebar, fell by 17.50 points from May to 12.50 in June, the lowest reading since December last year. The price outlook for flat steel products, such as hot rolled coil, fell 23.10 points to 18.33 in June.

S&P Global Platts China Steel Sentiment Index – June 2016
(a figure over 50 indicates expectations of an increase; under 50 indicates a decrease)

The outlook for crude steel production in June plunged 23.81 points from the prior month to 33.33. Steel market participants expected steel inventories to drop slightly from May, with the June outlook edging down 2.92 points to 64.65.

"With steel prices in China on a decline since the start of May many steel buyers are sitting on the sidelines waiting for clearer price directions before committing," said Paul Bartholomew, senior managing editor of steel & raw materials for S&P Global Platts. "This is putting even more pressure on prices. Also, the outlook for new orders is even weaker now than it was late last year when steel prices reached a nadir."

"It appears that one saving grace for steel producer prices may be that many steel companies are looking to trim production, having already ramped up in recent months. This could provide some support for prices in coming months, particularly if end-user demand deteriorates," Bartholomew said.

The CSSI is based on a survey of approximately 70 to 85 China-based market participants including traders and steel mills. Data is compiled by S&P Global Platts' Shanghai steel team.

According to S&P Global Platts price assessments, separate to the CSSI, the Platts China export hot rolled coil price assessment in May averaged $379 per metric ton (mt), free on board (FOB) China. This was down 10% from the $421.6/mt FOB in April.

See historical price graphic at this link: http://www.platts.com/IM.Platts.Content/AboutPlatts/MediaCenter/PressRelease/Images/platts-china-steel-sentiment-index-june2016.jpg

The Platts China Steel Sentiment Index survey plays no role in Platts' formal price assessment processes. For more information, please visit: http://www.platts.com/IM.Platts.Content/MethodologyReferences/MethodologySpecs/steel.pdf

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