- The price of steel rises around the monthly high as China considers further production cuts.
- China’s NDRC and CISA are targeting further cuts in steel production to limit emissions.
- The Sino-American tussle and fears of an economic slowdown are weighing on risk appetite.
Steel prices remain under pressure around the one-month high hit earlier in the day as buyers battle risky sentiment ahead of Tuesday’s European session. That said, China’s recent moves to restrict metal production join manufacturing previously halted due to lower commodity prices to keep metal buyers hopeful despite fears of an economic slowdown.
While depicting the mood of the steel market, the most active rebar futures on the Shanghai Futures Exchange (SFE) are hovering around 4,041 yuan per metric ton ($596.00), down more than 1.0% during the day. That said, stainless steel prices are falling nearly 0.2% per day and hot rolled coil is falling 1.3% at the latest.
“China’s state planning agency, the National Development and Reform Council (NDRC) and the industry group China Iron & Steel Association (CISA) met last week to order further cuts in iron production. crude steel for the second half of 2022, according to Navigate Commodities,” Reuters said. . The news also mentioned that China aims to cut annual steel production for a second consecutive year to reduce emissions. First half production was down 6.5% compared to the same period last year.
Elsewhere, US House Secretary Nancy Pelosi’s visit to Taiwan and likely hardship for Chinese chipmakers due to US push to limit shipments of US chipmaking equipment are also weighing on sentiment. of the market. Along the same lines, news from a Chinese media outlet might suggest that the Dragon Nation is ready for a military exercise in Bohai in the South China Sea.
Additionally, Bloomberg’s article indicating that there are no hard limits for Beijing’s Gross Domestic Product (GDP) also appears to be weighing on the market’s risk appetite. The news quotes people familiar with the matter as saying: “China’s top leaders told government officials last week that this year’s economic growth target of ‘about 5.5%’ should serve as a guide rather than an elusive goal.
It should be noted that recent disappointing US PMIs followed last week’s second quarter US gross domestic product (GDP) to portray economic fears. Indirect signals from Fed Chairman Jerome Powell that the hawks are running out of steam could also weigh on the mood.
While painting the mood, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00. Additionally, Asia-Pacific equities and US equity futures are posting small losses. However, the coupon on US 10-year bonds drops 5.5 basis points (bps) to 2.55% at the latest.
Next, headlines about China and the recession will be crucial for steel prices, as production cuts appear to have failed to impress metal buyers.