December's PMI data for the steel sector and broader manufacturing indicates limited declines in industrial steel production. With downstream manufacturing rebounding and increased demand for steel, overall supply-demand pressures in the industrial steel market have eased. Considering market sentiment and production factors around the Spring Festival, the industrial steel market is expected to see a continued modest upward shift in January.

As the primary leading indicator, the PMI holds significant importance for the steel sector. This article analyzes potential January market trends by examining steel industry PMI and manufacturing PMI data.

Analysis of Steel PMI: Continued Easing of Supply-Demand Pressures in the Steel Sector

According to the Steel Industry PMI survey and release by the China Federation of Logistics & Purchasing's Steel Logistics Professional Committee, the index stood at 46.30% in December 2025, down 1.7 percentage points from the previous month. Looking at the sub-indices: - The production index on the supply side fell from 46.00% to 43.70%, indicating a continued acceleration in the overall slowdown of production. Production cuts at manufacturers of construction steel products like rebar appear to be relatively pronounced. - Indirectly reflecting demand, the finished goods inventory index dropped by 3.00 percentage points to 46.10, showing continued inventory reduction. New export orders stood at 41.10%, down 6.10 percentage points from the previous month, reflecting a sharp decline in steel exports following a phase of export rushes. The new orders index was 45.40%, down 3.50 percentage points from the previous period, indicating weak overall steel demand. However, considering production and inventory conditions, the steel market is in a phase of weak supply and demand. With overall inventory pressure easing, fundamentals have shown slight improvement.

Analysis of Manufacturing PMI: Manufacturing Demand Rebounds

Data released by the National Bureau of Statistics' Service Industry Survey Center and the China Federation of Logistics & Purchasing shows that in December 2025, the Manufacturing Purchasing Managers' Index (PMI) reached 50.10%, up 0.90 percentage points from the previous month, returning above the 50% boom-bust line.

Among the sub-indices, the key Production Index reached 51.70% this period, up 1.70 percentage points from the previous period and significantly above the 50% threshold. This indicates sustained recovery in demand for upstream raw materials like steel. The New Orders Index reached 50.80%, up 1.60 percentage points from the previous period, while the Purchasing Volume Index stood at 51.10%, also increasing by 1.60 percentage points. Overall, most demand-related sub-indices remained above the 50% threshold, indicating an upward trend in steel demand from upstream manufacturing sectors. By enterprise type, large enterprises made a notable contribution, with high-tech enterprises showing a significant rebound.

January Steel Price Outlook: Moderate Upside

Considering the steel industry and related downstream manufacturing sectors, the current industrial steel market in January shows continued decline in overall steel production enthusiasm. However, monitoring indicates this decline is primarily driven by construction steel enterprises, with industrial steel enterprises showing less pronounced reduction. On the demand side, manufacturing steel demand is expected to rebound. Given that the 2026 Spring Festival falls in the latter half of February, manufacturing production in January will face limited disruption. Additionally, small-batch winter stockpiling toward month-end remains possible. Overall supply-demand tensions in the industrial steel market may continue to ease. Combined with the market's preemptive reaction to persistent bearish expectations since December 2025 and pessimistic forecasts of heightened supply-demand pressures post-Spring Festival, industrial steel prices are projected to see a continued slight upward shift in January.

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