Bullish sentiment in China's steel market seen fading in Nov'24: NDRC

MySteel: Releasing the results of its latest survey of key wholesale steel markets across the country on 4 November, China's National Development and Reform Commission (NDRC) said they indicated that the optimistic mood that had buoyed the market in October has waned significantly entering November.

The survey includes wholesale markets in South China, Shanghai, and Tianjin, and based on six key indices, it revealed that both the Sales Price Expectation Index and the Purchase Price Expectation Index for the markets for November stood at 53.67% and 53.53%, respectively. These figures reflect notable drops of 24.76 and 22.42 percentage points from October and signal a marked decline in market sentiment compared with the previous month, the state planner said.

However, both indices remain above the critical 50% threshold, suggesting a modest expectation of market improvement this month, analysts note.

In terms of demand expectations, the Sales Volume Expectation Index for this month dropped to 44.04%, making for a sharp fall of 17.72 percentage points from October. Similarly, the Inventory Expectation Index fell further to 46.33%, down 12 percentage points from the previous month. This suggests weaker downstream demand as November sets in, while inventory levels could potentially experience a slight decline.

A more substantial reduction in steel stocks may only occur if steelmakers and traders significantly lower their offering prices to stimulate sales, the report suggests, but this could further erode their profit margins in November. This scenario is supported by a tightening of the Sales Profit Margin Expectation Index, which dropped to 39.91%, a decrease of 12.05 percentage points from October.

In addition, the report highlights concerns over the profit outlook for steelmakers whose margins may worsen if production costs remain high. NDRC's report indicated that the Sales Cost Expectation Index stood at 50.46% for November, still above the 50% threshold, despite a notable drop of 19.64 percentage points from October.

The NDRC noted that the steel market's bullish performance in October was largely driven by market optimism following the central government's release of its stimulus policy package at end-September, as well as expectations of a lift in steel consumption last month that usually occurs in autumn.

However, with the market frenzy cooling, the NDRC warned that unless additional positive policies are introduced to support the market, China's steel market may face further challenges amid a seasonal demand dip that usually appears in winter.

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and BigMint.