China steel sentiment index slumps in October

New order expectations fall ahead of holiday.

Chinese steel market sentiment fell in anticipation of slower trading activity due to the country’s Golden Week holidays in early October, according to the latest S&P Global Platts China Steel Sentiment Index (CSSI), which showed a headline reading of 48.92 out of a possible 100 points.

The October index slumped by 25.51 points from September and was the lowest reading since June this year. 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 in October fell by 25.54 points from the previous month but remained above the 50 threshold. Expectations for export orders in October dropped to the second-lowest reading this year to just 22.23, down 25.15 points on the previous month, as market participants ceased offering material ahead of the holiday.

“Seasonally, October tends to be a weaker month for the index since most steel trading activity stops during the Golden Week holidays,” said Paul Bartholomew, senior managing editor of steel & raw materials for S&P Global Platts. “Therefore, the large month-on-month drop in the outlook for new orders is not necessarily indicative of a significant slump in demand. That said, there is a lot of uncertainty about how the market will respond when trading resumes after the holiday, especially since sentiment in the second half of September was the most bearish since June.”

The outlook for flat steel product prices for October dropped by 4.93 points to 54.44, while the view on price direction for long steel products edged up by 4.17 points to 37.50, well below the 50 neutral level.

More market participants expected steel production to rise in October compared with September, which was affected by weaker output during the G20 Summit in eastern China’s Hangzhou. Sentiment toward steel inventories was nearly flat compared to the prior month, at 47.87.