Singapore — China's steel purchasing managers' index, or PMI, increased by 4.1 basis points month on month in November to reach 45.4, ending six straight months of drops, according to index compiler CFLP Steel Logistics Professional Committee.

Steel products and raw materials prices both witnessed some increases in November, driven by demand recovery, healthy margins and stronger crude steel production.

Coming into December, the cold weather is expected to reduce steel demand, especially in southern China, CFLP said. As a result, steel prices are likely to drop in December if no steel production curbs are introduced to reduce pollution.

The sub-index for steel production increased by 1.1 basis points from October to 43.4 in November on demand recovery. Steel mills also indicated they would lift purchasing of raw materials.

The sub-index for raw materials inventories rose by 1.3 basis points to 39.2. Meanwhile, the sub-index for new orders at steel mills in November was 43.8 points, up 12.2 basis points on the month, ending three straight months of sub-40 readings.

The sub-index for steel inventories dipped by 9.7 basis points from October to 27.1 in November.

Rebar stocks saw the biggest drop, down 20% on the month, according to the index.

Lower finished steel inventories should help support steel prices.

In a separate steel PMI carried out by the Hebei Metallurgical Industry Association, November's headline reading rose by 4 points from October to 51.9. This means the index for China's major steel production province was stronger than for the country as a whole.

In Hebei, the sub-index for new orders in November increased by 6.7 basis points month on month to 55.3.

"Downstream demand was stronger than expected in November, which led to robust steel sales," the association said.

The sub-index for steel output was up 5.2 points on the month to 50.8, while the sub-index for finished steel stocks in November dropped by 1.2 points to 50.2.