Northern China's steel hub Hebei witnessed its Purchasing Managers' Index (PMI) for steel sector picked up to 49.8 in January from 46.5 a month ago, showed data from Hebei Metallurgical Industry Association, standing for a fourth consecutive month below the 50-point mark that separates growth from contraction, but very close this time.
A major sub-index for new orders stood at 53.8 in January, up 5.9 percentage points from December.
Spurred by winter restocking activities from house builders and other end users, the spot steel market picked up in the second half of the month, with market expectations turning around towards bullishness.
Spot price of rebar (HRB 400 20mm) in Shanghai market stopped the decline at 3,760 yuan/t on January 15 and stood steady around 3,900 yuan/t since January 22. On January 31, the price was stable at 3,890 yuan/t.
The sub-index for new export orders inched up to 36.7 compared with 36.4 a month ago, indicating exports of steel products improved slightly but still remained in the low ebb.
Output sub-index stood at 46.4, up 6.4 percentage points from the month prior. The index's pickup has been mainly driven by a small increase in production out of good profit and heating responsibility from some blast furnaces in the province.
The sub-index for inventories of steel products rebounded by 3.2 percentage points to 35.2 in January, which were mainly put down to poor demand weakened by snow and rain weather approaching the Lunar New Year.
Sub-index for inventories of raw materials was 48.2, an increase of 4.2 percentage points from December, thanks to the winter restocking activities end users took at the current low price levels.
Rebar stocks grew faster than hot-rolled coils during the winter restocking campaign, with a bullish stance the market took on the resumption of building activities in the middle of March or later.
Plate products, with little difference between slack and busy seasons, posted limited increases in end users' stocks.
Looking ahead, the steel market seems dull in the month of the New Year, with no other factors more than supply tightness as production can't come back to normal immediately from the holiday. There is still a period steel mills spend on furnace maintenance after the holiday.
With weakness at both supply and demand ends, the February prices of steel products are expected to stay low with small volatilities.
(Writing by Alex Guo Editing by Harry Huo)
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