The health of China's steel sector is expected to remain strong in April, despite a minimal decline in sentiment, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a reading of 72.14 out of a possible 100, down 1.91 points from the March level of 74.05. The Platts CSSI reflects the responses of steel makers, traders and exporters at the end of each month to questions about new orders for the month ahead and the proprietary survey contains additional sentiment readings on demand, inventories and prices.

"The survey for April showed that China's steel sector expects increased orders this month, with long product prices performing better than flat products," said Tomas Gutierrez, Platts managing editor for China metals. "Long products are expected to see a continued seasonal pick-up in orders as construction activity resumes after the winter."

Similar to a purchasing managers' index, a Platts China Steel Sentiment Index greater than 50 indicates sentiment in the steel sector is generally strengthening, which could be a harbinger of sector improvement in the coming month, and a figure less than 50 indicates sentiment is declining, which could suggest the sector could be headed for slowdown or downturn. The Platts China Steel Sentiment Index is a weighted total of survey respondent estimates of new orders.

In addition to the overall Index reflecting new orders expectations, the Platts China Steel Sentiment Index Survey also includes separate sentiment categories reflecting expectations of production, inventories, and prices of domestic steel and steel for export.

Traders' views of inventories in the latest index survey slid to 32.24 from the prior month's 33.28, suggesting continued de-stocking in April as traders continue to eliminate the inventory buildup during February to better control price and margin risks.

Notably, no trader survey respondents active in steel long products such as reinforcement bar and rod anticipated higher inventories for April. For the most part, traders of steel flat products such as sheet and plate continued to expect little change in inventory levels, though some respondents expected an increase.

"While both long- and flat-products traders expected an increase in orders in April, the differing outlook in expectations for inventories is telling," said Gutierrez. "Longs traders expected to benefit more and hoped inventories would fall and prices increase, whereas flats traders expected the opposite: that inventories would increase slightly and prices would fall."

Arguing that prices have likely bottomed by now, long product traders pointed to current historically-low prices and the seasonal recovery in demand, Gutierrez said. But they don't foresee any sizable increase in prices. Flats traders also expressed expectations of largely range-bound prices ahead, though with notations of scope for slight reductions.

The index for mill inventories showed a decline for the first time since December 2013. Mill inventories have increased steadily during recent months and mills continued to suffer from traders' moves to reduce stocks. A decline in mill inventories could be aided in part by a reduction in output. The production index dropped below 50 to 44.12.

The Platts CSSI Survey suggests an improvement export prices in April alongside an anticipated increase in export orders for the month. According to survey respondents, China's export prices fell to very competitive levels in March, paving the way for a possible increase in orders.

The average price (including 17% value-added tax) of China's domestic steel rebar in Beijing, a bellwether location of the nation's steel industry, was Yuan 3,169 per metric ton ($515/mt) in March, according to Platts' price assessments. This followed a February average of Yuan 3,228/mt ($516.5/mt).

The monthly Platts China Steel Sentiment Index is based on a survey of approximately 50 to 75 China-based market participants including traders, stockists and steel mill operators. The survey of month-ahead sentiment is conducted during the last full working week of each month, with the results published via press release and Platts' products and services before the 10th of the next month. Platts began tracking steel sector sentiment in China in May 2013. The Platts China Steel Sentiment Index survey plays no role in Platts' formal price assessment processes.