At the end of January, the market entered the traditional Chinese New Year holiday. Currently, downstream end-users have gradually started their holidays, and the market has entered a shutdown phase. Steel transactions have become mediocre, and overall steel demand has hit a seasonal low. Macro side, January saw relatively limited favourable macro policies, and the market entered a policy vacuum period. However, China's Manufacturing PMI remained in the expansion territory for three consecutive months, indicating that macroeconomic stimulus policies are taking effect. With the further implementation of existing policies and a package of incremental policies, overall market demand is expected to recover steadily and accelerate.

In February, downstream enterprises are expected to resume work gradually after the Lantern Festival, ushering in a wave of work resumption and production recovery. Downstream demand will gradually recover, and overall steel demand will continue to rebound.

I. New Orders Received by Enterprises

According to SMM survey data, 35% of surveyed enterprises have recently undertaken new projects, remaining flat MoM, while 65% are still working on old projects without receiving new ones.

China Construction Third Engineering Bureau Second Construction Co., Ltd. stated: Currently, many projects have been suspended, and some workers have already left early for home. Most will start their holidays this Thursday and return to work on the tenth day after the Chinese New Year. Year-end projects did not accelerate and proceeded at a normal, relatively slow pace. After the holiday, two projects are under negotiation, with one expected to start, while the timeline for the other remains unknown. The situation is relatively stable, with the number of projects under negotiation similar to previous years.

Shanghai Construction First Group Construction & Development Co., Ltd. stated: More than half of their projects have been suspended. This month, 1-2 projects will be completed and delivered, but no new projects are expected to start after the holiday. The industry situation is not very optimistic, and they have been focusing on debt collection recently, with a dedicated department handling this task. They have not started their holiday yet, and the holiday schedule is undecided. The resumption of work depends on payments from clients.

China Construction Third Engineering Bureau Group Beijing Co., Ltd. stated: Projects are about to be suspended. Recently, they have participated in many project bids, but based on current indications, only a few are likely to be successful. Preparations for post-holiday bidding have already begun, and the chances of winning bids after the holiday are expected to improve. No new projects started at the year-end, but one or two projects are expected to start after the holiday, with some already in progress. The outlook for next year's projects is not very optimistic.

Chart-1: Project Undertaking Status in Real Estate and Infrastructure Industries

II. Financial Constraints Show No Significant Improvement

According to the SMM survey, financial constraints in the construction materials industry showed no significant improvement this week. 50% of surveyed enterprises still face financial difficulties, up 8% from the previous period, while the other 50% reported relatively normal financial conditions, sufficient to maintain normal production operations.

Sichuan No. 15 Construction Co., Ltd. stated: The holiday will only start at the year-end, and the resumption of work schedule is undecided. Projects remain relatively busy, with some rush to meet deadlines. No new projects are planned after the holiday, and project plans will be reviewed after the holiday. Current payment collection is relatively smooth, similar to previous years. Government funding in Sichuan is relatively stable, with fewer issues compared to other provinces. Ongoing projects remain unchanged.

China Railway 14th Bureau Group Fourth Engineering Co., Ltd. stated: We have almost no winter stockpiling due to financial constraints, leaving no extra funds for reserves. No projects are ready to start immediately after the holiday, and there are few expected projects. The current market is mediocre, and without funds, no one dares to proceed with projects. Year-end settlements are also likely to be delayed.

China Construction Eighth Engineering Division North China Branch stated: Projects have already been suspended for the holiday. One project was completed before the holiday, and there are no ongoing projects at the moment. Post-holiday arrangements depend on the company. There have been no significant changes in personnel, but the financial situation is not very optimistic. The company is expected to have new projects after the holiday.

Chart-2: Financial Status in Real Estate and Infrastructure Industries

III. Downstream Enterprises Show Slightly Improved Sentiment Toward the Market Outlook

According to the SMM survey, 53% of downstream enterprises remain optimistic about the market outlook, up 1% from the previous period, believing that overall demand may improve with stronger policy support. Meanwhile, 47% of enterprises remain cautious, citing multiple factors contributing to relatively weak market demand, with no significant improvement expected in the short term.

China Railway First Bureau Group Co., Ltd. stated: The holiday has already started. There are few year-end projects, and no new projects are planned. This year, no winter stockpiling will be conducted, and purchases will be made as needed. Financial conditions are tight, leaving no funds for winter stockpiling. Normal work will resume after the holiday, with no significant changes in personnel. The outlook for post-holiday projects is uncertain, and the infrastructure sector is not expected to perform well.

China Railway Construction Group East China Branch stated: Projects are gradually being suspended, with the current operating rate below 60%. Normal work will resume after the holiday. There are few year-end projects, but 1-2 new projects are expected to start after the holiday. Personnel changes are minimal, and financial conditions are relatively stable. The operating rate is expected to increase slightly in the next two months.

China Railway Xiongan Construction Co., Ltd. stated: The holiday has not started yet and is expected to begin next week. Current projects are proceeding normally, with normal construction speed. No reserves were made at the year-end. During the holiday, one or two projects will continue to operate to accelerate progress. Unfinished projects will be followed up after the holiday. Financial conditions are relatively stable, with no significant changes. Projects are expected to continue over the next two months.

Chart-3: Market Expectations in Real Estate and Infrastructure Industries

In summary, downstream enterprises gradually suspended work and started holidays in January due to the Chinese New Year holiday. Most enterprises had no new project plans at the year-end, focusing mainly on payment collection. Due to significant financial pressure on some enterprises, winter stockpiling willingness was weak, leading to a seasonal decline in overall demand. Steel demand hit a low point in January. In February, as the Chinese New Year holiday ends, the market is expected to gradually resume work and production. According to the SMM survey, most enterprises are expected to resume production between the tenth and fifteenth day after the holiday, with demand expected to recover gradually in mid-to-late February.

* [Survey Method: Telephone Survey]

* [Sample Data: Nationwide random sampling, covering infrastructure, real estate, automobile manufacturing, home appliances, machinery processing, etc., with over 100 samples]

*SMM For more content on steel information, analysis reports, and databases, please contact the SMM Steel Division.