The health of China’s steel sector is expected to improve in March, according to the latest Platts China Steel Sentiment Index (Platts CSSI), which showed a reading of 74.05 out of a possible 100, up 17.19 points from the February level of 56.86.

The Platts CSSI reflects the responses of steel makers, traders and exporters at the end of each month to questions about new orders for the month ahead and the proprietary survey contains additional sentiment readings on demand, inventories and prices.

Similar to a purchasing managers’ index, a Platts CSSI greater than 50 suggests the steel sector may be headed for improvement and a figure less than 50 indicates the sector may be headed for decline. The index is a weighted total of survey respondent estimates of new orders.

In addition to the overall Index reflecting new orders expectations, the Platts CSSI Survey also includes separate sentiment categories reflecting expectations of production, inventories, and prices of domestic steel and steel for and export.

While most components of the survey for March showed a score greater than 50, indicating expansion, traders’ views of inventories slumped to 33.28 from the prior month’s 88.14, suggesting that market inventories were overbuilt in the period around China’s New Year holidays in February and will likely decline immediately ahead.

Some 70% of survey respondents are active in steel long products, such as reinforcement bar and rod, anticipated declines in inventories for March. Traders of steel flat products, such as sheet and plate, held mixed views on the month-ahead outlook. Most expected no change in inventories and less than one third predicted an inventories drop.

Survey respondents also held mixed views on the outlook for steel prices. While expectations of seasonal warmer weather and renewed construction activity was seen as a likely booster to steel long product prices for March, survey respondents foresaw no significant deviation from recent price bands.

Mill inventories may increase slightly this month despite better end-user demand, as traders temper purchases to better control inventories, the survey showed.

Despite a rise in the inventories component, steel mill operators indicated production will remain steady. Supporting this indication is the return of seasonal demand from the construction sector and widespread market hopes that pollution-control initiatives could be eased.

The monthly Platts China Steel Sentiment Index is based on a survey of approximately 50 to 75 China-based market participants including traders, stockists and steel mill operators. Platts began tracking steel sector sentiment in China in May 2013.