China's steel industry is poised for improvement this month due to increase in the construction activity which would bolster demand and help lower inventories, according to Platts.
The health of China's steel sector is expected to improve in March, the latest Platts China Steel Sentiment Index (Platts CSSI) said.
"The survey for March suggested that China's steel sector expects improved orders to allow it to lower inventories and boost prices," Platts managing editor for China metals Tomas Gutierrez said in a statement.
He added: "Construction activity is poised to pick up in the usually warmer month of March and this could help bolster steel demand for some products."
The Plats CSSI showed a reading of 74.05 out of a possible 100, up 17.19 points from the February level of 56.86. It reflects the responses of steel makers, traders and exporters at the end of each month to questions about new orders for the month ahead.
A Platts China Steel Sentiment Index greater than 50 suggests the steel sector may be headed for improvement and a figure less than 50 indicates the sector may be headed for decline. The Platts China Steel Sentiment Index is a weighted total of survey respondent estimates of new orders.
While most components of the survey for March showed a score greater than 50, indicating expansion, traders' views of inventories slumped to 33.28 from the prior month's 88.14, suggesting that market inventories were overbuilt in the period around China's New Year holidays in February and will likely decline immediately ahead, the statement said.
Some 70 per cent of survey respondents active in steel long products, such as reinforcement bar and rod, anticipated declines in inventories for March, it said.
"The traders of all steel products show a clear indication of reduced stocks levels," said Gutierrez, adding that "while traders look for an improvement in steel demand in March, they believe tight credit conditions and an uncertain longer-term outlook are reasons to increase cash flow and minimise the risks of holding inventories".
The Platts CSSI Survey also suggested a bearish outlook for export prices in March despite an anticipated increase in export orders for the month.
The Index is based on a survey of approximately 50 to 75 China-based market participants including traders, stockists and steel mill operators.
Platts began tracking steel sector sentiment in China in May 2013. Platts is a global provider of energy, agriculture, petrochemicals information and a premier source of benchmark prices for the physical and futures markets.
