Chinese domestic hot rolled coil prices fell 9% from an average of Yuan 3,993/mt ($658) in 2012 to Yuan 3,676/mt ($605) in 2013, according to Platts' HRC price series, as steelmakers struggled to stay profitable in a weak domestic market.

Flat steel producers, however, were more confident of stronger prices over the next month or so due to fairly low steel inventories and expectations of restocking by traders and mills, according to the latest Platts monthly China Steel Sentiment Survey. Chinese steel prices are typically at their strongest in the January-March quarter, Platts data shows.

Indeed, the outlook for flats prices hit a yearly high of 66.67 in the December survey. The other standout score was 66.66 for the outlook for total steel inventories, compared with just 47.05 in November, indicating that many market participants anticipated flat steel stocks to rise in January.

In fact, HRC inventories in Shanghai declined at the start of January due to limited new arrivals, but the drawdown of stocks was slower than in December.