Core Viewpoint - The steel industry is experiencing a slowdown in contraction, with the PMI for January 2026 at 49.9%, indicating a slight recovery but still below the critical 50% threshold [1][3]. Demand and Supply - Demand remains weak due to seasonal factors, including low temperatures and the upcoming Spring Festival, which restricts construction activities [3][4]. - Some infrastructure projects are nearing completion, contributing to a slight increase in steel demand, while export orders are under pressure due to policy changes and weak overseas demand [4][14]. - The new orders index rose to 50.2%, indicating a return to expansion after five months, although overall demand remains subdued [4][14]. Production and Inventory - Steel production is stabilizing, with the production index rising to 48.4%, ending a two-month decline, and average daily crude steel production increasing by 21.6% compared to the previous month [8][12]. - Finished product inventory is accumulating, with the inventory index at 52.2%, indicating a return to expansion after three months [8][12]. Price Trends - Steel prices showed a trend of rising and then falling, with the Shanghai rebar price index peaking at 3,234 CNY/ton before declining to 3,196 CNY/ton by the end of January [10][12]. - Raw material procurement activities have increased, with the procurement index at 57.9%, marking a significant rise and indicating stronger purchasing by steel mills [12][14]. Future Outlook - In February 2026, steel demand is expected to remain weak due to the seasonal effects of the Spring Festival, with significant reductions in construction activities and a slow recovery in the real estate sector [14][15]. - Steel production is likely to decline again as mills may reduce output in response to lower demand and ongoing environmental regulations [15].