In December 2024, the steel industry’s PMI came in at 47.5%, down 3.1 percentage points from the previous month and falling into the contraction range. It is expected that in January 2025, both supply and demand in the market will continue to contract, with raw material prices remaining low. As a result, iron ore prices are likely to remain weak, while steel prices will experience slight fluctuations. This is according to a recent report released by the Specialized Committee on Steel Logistics of the China Federation of Logistics and Purchasing.

The changes in individual indices show that both steel demand and steel mill production have contracted, raw material prices continue to decline, and steel prices are fluctuating at low levels.

On the demand side, the impact of temperature is starting to become evident, and steel market demand has begun to contract. Currently, the growth in winter stockpiling demand is struggling to offset the seasonal weakening in demand, while demand for bulk commodities is also failing to provide strong support. Overall, domestic steel market demand has slightly contracted, and the market continues to adopt a wait-and-see approach. In December 2024, the new orders index for the steel industry came in at 48.7%, down 1.8 percentage points from the previous month, indicating that steel market demand has softened after two consecutive months of growth.

On the production front, shrinking demand and high inventory levels have led to a decline in steel mill output. As demand has softened and steel mills had accumulated substantial inventories earlier, their willingness to ramp up production has waned. In December 2024, the steel mill production index came in at 48.3%, down 5.3 percentage points from the previous month, falling into contraction territory after having remained above 53% for three consecutive months. At the same time, raw material purchasing activity has also slowed accordingly, further weakening support for raw material prices. As a result, raw material prices continue to decline, showing a widespread downward trend. After a period of consecutive increases, iron ore prices have now entered a correction phase.

The report forecasts that in January 2025, demand in the steel market may continue to decline, and steel mills’ production will keep contracting, thereby causing a corresponding slowdown in demand for raw materials. As a result, raw material prices are expected to remain weak and fluctuate mildly. Iron ore prices are likely to stay on the weaker side, and after five rounds of price cuts for coke, there is limited room for further declines.