The China Steel Sentiment Index (CSSI) by Platts has slumped for October, recording 35.46 points out of a possible 100 points. In contrast, that of September had been 55.64 points, and the decrease of 20.17 points could dampen price recovery hopes by Chinese steel market participants.

The CSSI reflects expectations of market participants for the month ahead. A reading of over 50 points indicates expectations for an increase in health for the industry; under 50 indicates a decrease.

With regard to new domestic steel orders, October recorded 36.09 points, down 20.89 points from September. Export order expectations also went down by 6.30 points to 28.27 points.

With the lack of domestic and export demand expectations for steel, this might explain why inventory levels held by traders are projected to increase: October recorded 71.20 points out of a possible 100, up 23.50 points from that of September.

According to Paul Bartholomew, Platts managing editor, steel & steel raw materials, the poor results could have been attributed to the fact that the October CSSI was conducted before China’s national holidays, which could have influenced steel market participants’ expectations for demand and prices to soften further.

That said, he still does not expect much of an improvement when the market restarts because underlying demand in China is weak in response to a slowing economy. Instead, the country would likely look beyond themselves for export of steel.

“The lack of confidence in domestic demand for steel explains why Chinese mills and traders are increasing looking overseas for customers,” he said. The country could potentially export around 110 million metric tonnes of steel this year, he added.