Singapore, 31 January (Argus) — China's steel sector purchasing managers' index (PMI) increased by 5.9 points from a month earlier to 51.5 in January, rising above the reading of 50 that indicates an expansion, on the back of higher domestic and export orders. The steel production sub-index rose by 2.2 points at 46.8, indicating output contracted at a slower pace this month than in December, said the China Steel Logistics Professionals Committee (CSLPC), which compiles the index. Crude steel output has fallen in December and January because of winter output restrictions imposed in 28 cities in north, east and central China to curb emissions. These restrictions will remain in place until February. Steel mills sharply accelerated imports of raw materials such as coking coal and iron ore this month to expand inventories. "Enterprises hold optimistic market outlooks and increased the demand for raw materials, so that they can be put into production quickly after the lunar new year holiday," said CSLPC. Seaborne iron ore prices are expected to continue to rise in the near future on the back of strong demand. The Argus ICX 62pc seaborne fines price hit at a 20-month high of $83.95/dry metric tonne yesterday, while Chinese buyers have also stepped up coking coal imports over the past few days. The new domestic orders sub-index rose by 13.9 points to 53.4 in January, while the sub-index for export orders rose by 8.3 points to 44.1. This year's winter has been warmer than usual in China, leading to fewer construction halts. Market expectations are also turning more bullish as signs emerge of a thaw in the US-China trade spat, said CSLPC. But China's manufacturing sector PMI was at 49.5 points in January, up only slightly from 49.4 in December, according to the national bureau of statistics. Slower manufacturing growth hit demand and prices of flat products for most of 2018.
Optimism is rising in the Chinese steel sector, as the latest purchasing managers' index (PMI) revealed a 5.9 point MoM increase to 51.5 in January, marking an expansion of the sector. It followed a 13.9-point uptick in the domestic orders sub-index to 53.4 and a rise of 8.3 points to 44.1 for overseas demand. Chinese steel producers have also grown stockpiles of coking coal and iron ore ahead of an expected rise in demand following the end of the Lunar New Year holiday and winter output restrictions. Anticipation of a thaw in the US-China trade war is also boosting sentiment.