Along with raw materials, Chinese rebar and hot rolled coil futures fell slightly on Tuesday, the first trading day of 2023. Macro expectations however were still playing a positive role in the market, Kallanish notes.

On the Shanghai Futures Exchange, the most-traded May 2023 rebar contract closed CNY 42/tonne lower than 30 December, the previous trading day, at CNY 4,063/t ($588/t), while the same contract for HRC lost CNY 44/t to CNY 4,099/t.

The main contract of coking coal and coke futures closed 2% and 1.6% lower respectively than 30 December, hitting steel futures sentiment on Tuesday. In spot markets, coke prices also lost CNY 100/t after four consecutive rises totalling about CNY 400-440/t in recent weeks.

The decrease in coke prices was forced through by suffering steelmakers, although coking companies are themselves facing negative profit margins. Steel production is trending lower before the Chinese New Year so that steel mills want to secure earnings by lowering costs.

The latest purchasing manufacturers’ index (PMI) data is weak. The National Bureau of Statistics data indicates that December manufacturing PMI hit a year-long low of 47. Meanwhile, PMI in the steel sector ended a two-month decline on a month-on-month basis and rebounded to 44.3 in December, according to the CFLP Steel Logistics Professional Committee.