According to the PMI of the steel industry surveyed and released by the Steel Logistics Professional Committee of the China Federation of Logistics and Purchasing, the PMI in January 2025 was 43.3%, a decrease of 4.2 percentage points month-on-month, indicating that the steel industry continued to operate weakly. Changes in sub-indices show that affected by seasonal factors, steel market demand further contracted, steel mill production continued to slow down, raw material prices remained downward, and steel prices fluctuated slightly downward. It is expected that in February, the demand in the steel market will continue to operate weakly, there will be no significant recovery in production, and both raw material and steel prices will fluctuate at a low level.
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Obvious Impact of Seasonal Factors, Further Contraction of Steel Market Demand
In January, with cold temperatures in many places and the approaching Spring Festival, the demand in the steel market further contracted. Firstly, the domestic demand for construction steel declined. Affected by the weather in northern regions, outdoor construction basically came to a halt, and most construction projects entered a shutdown state, significantly reducing the demand for construction steel. Although the temperature in southern regions was relatively higher, affected by the Spring Festival holiday, construction workers gradually returned to their hometowns, and the progress of construction projects slowed down, also leading to a contraction in the demand for construction steel. Secondly, the overall willingness to store steel for the winter in 2024 was weak, and it was basically completed before the festival. Therefore, winter storage had a limited impact on demand. Thirdly, as the Spring Festival approached, the operation of various industries tended to slow down, and the demand for steel also tightened accordingly. The new order index of the steel industry was 41.7%, a decrease of 7 percentage points month-on-month. In terms of terminal demand, according to Shanghai Zhuo Steel Chain, downstream terminals gradually finished work in January, and the overall market entered a stage of weak supply and demand. According to the monitored procurement data of terminal wire rods and screws in Shanghai, the terminal procurement volume in Shanghai dropped significantly in January, with an overall decrease of 27.3% month-on-month, showing the characteristics of an off-season.
Short-term Contraction of Production Personnel, Continued Slowdown of Steel Mill Production
In January, as the Spring Festival approached, a large number of steel mill employees needed to return to their hometowns for the festival, resulting in a short-term contraction of production personnel. Coupled with the decline in steel demand, the production willingness of steel mills decreased, production activities contracted, and some enterprises chose to conduct equipment maintenance and repairs during the Spring Festival. In addition, the northern regions entered the heating season, and environmental protection production-limiting measures also restricted the production of some steel enterprises. The employment index was 43%, a decrease of 2 percentage points month-on-month. After two consecutive months of stable operation, it declined rapidly, indicating a relatively obvious reduction in the number of production personnel. The production index was 42.5%, a decrease of 5.8 percentage points month-on-month, operating in the contraction range for two consecutive months, and the production side has been operating weakly recently.
Continued Downward Trend of Raw Material Prices
In January, due to the decline in the supply-demand situation in the steel market, the procurement speed of steel mill raw materials slowed down. The purchase volume index was 47.7%, a decrease of 1 percentage point month-on-month. The weakening of raw material demand also weakened the price support. The purchase price index was 22%, a decrease of 7.5 percentage points month-on-month, declining for four consecutive months month-on-month. Currently, it has dropped to a relatively low level, indicating that the prices of steel-making raw materials remain in a downward trend. Looking at different categories, the price of iron ore fluctuated slightly, the price of the coke market dropped significantly after seven rounds of price cuts, and the price of scrap steel also declined due to the fall in demand. Overall, the prices of raw materials continued their downward trend in January.
Slight Fluctuation and Downward Trend of Steel Prices
In January, affected by the approaching Spring Festival, the trading volume of steel decreased significantly. Coupled with the weakening support from the cost side, steel prices continued to fluctuate downward. The Shanghai rebar price index showed that the price on January 2 was 3,325 yuan per ton. After that, affected by the decline in demand, the price slightly dropped. However, later, the macro-expectation improved, and the price slightly rebounded. The price on January 21 was 3,318 yuan per ton, with a decrease of only 7 yuan per ton compared with the beginning of the month.
Expected Weak Operation of Steel Market Demand in February
In the first ten days of February, affected by the Spring Festival, the large-scale shutdown of construction projects will last for some time. After the festival, some projects in southern regions will gradually resume work, but the overall construction scale and progress are difficult to return to normal levels in February. In addition, the resumption of work in northern regions is even slower due to weather effects. Therefore, the demand for construction steel as a whole will operate at a low level. Secondly, the real estate market is still hovering at a relatively low level. The overall new housing starts, investment, and ongoing construction are still not optimistic, which seriously lacks support for the demand of bulk commodities. Thirdly, the production rhythms of many industries such as home appliances and construction machinery slow down around the Spring Festival holiday. Most enterprises are in a state of vacation or semi-vacation, and the procurement demand for steel is also at a relatively low level. Overall, affected by the Spring Festival holiday, the demand will still operate weakly in February.
