Chinese steel market sentiment slumped in January ahead of the Lunar New Year holiday period at the end of the month, with expectations for long and flat steel product prices falling markedly, according to the latest S&P Global Platts China Steel Sentiment Index (CSSI), which showed a headline reading of 34.13 out of a possible 100 points.

The January 2017 December CSSI dropped by 18.48 points from December’s 52.62 on lower expectations for domestic and export steel orders ahead of the holiday, which officially starts on January 28. The outlook for new domestic orders fell 17.18 points from December to 35.82, while export orders dropped by a more significant 33.55 points to just 14.59 in January.

A reading above 50 indicates expectations of an increase/expansion and a reading below 50 indicates a decrease/contraction.

Expectations for long steel product prices – which tend to be more volatile given the influence of Shanghai, rebar futures – plunged by 68.75 points to just 6.25 in January. This was the weakest reading for longs since December 2015 when Chinese steel prices fell to record lows. The outlook for flat steel prices in January dropped 40.28 points to 38.89, the weakest reading since June last year.

By comparison, the outlook for steel production remained stable, falling just 4.35 points from December to 50 in January. This measure has stayed in the 46-55 point range since August. There was a big fall in the outlook for steel inventories held by traders, with the sub-index softening by 21.65 points to 42.13 in January, indicating less buying from mills over the holiday.