- Steel price drops to the lowest levels in
more than two weeks amid demand, profit concerns.
- Rationing electricity due to heat waves
restricts profit concerns and disappoints steel makers.
- Doubts over PBOC’s ability to revive
economy, the jump in coronavirus cases exert downside pressure on the
metal price.
Steel
price stands on the slippery ground as bears cheer grim concerns surrounding
the largest metal user China during early Thursday in Europe. Also keeping the
steel bears hopeful is the lack of significant data/events that allowed the
traders to consolidate the metal’s recent gains after holding it tight for
multiple days.
That
said, Steel Rebar futures on the Shanghai Futures Exchange (SFE) fell 2.1%
whereas the hot-rolled coil slumped 2.6%. Further, stainless steel loses around
3.4% to revisit the monthly low.
A forced stop in steel manufacturing, amid a heat wave in China, joins the
pre-established emission-linked limited to reduce the profit motive of the
steel manufacturers, which in turn dashed optimism surrounding the metal.
Further, rising steel scrap prices and supply crunch could also be added to the
list of catalysts negatively affecting metal prices.
“A
record-breaking heat wave gripping several regions in top steel producer China
since mid-July has caused power shortages, forcing authorities to ration
electricity with residential use prioritized over industrial consumption,” said
Reuters.
Also,
covid conditions recently worsened in China, renewing fears of another round of
virus-led lockdowns, which weigh on the metal prices. “China’s Covid cases
surged to a three-month high, driven by a worsening outbreak in the tropical
Hainan province that has become the country’s biggest since Shanghai was shut
down in the spring,” said Bloomberg.
Elsewhere,
headlines surrounding the People’s Bank of China (PBOC) and Taiwan also raise
fears concerning China and lured steel bears. “PBOC has limited room to ease
due to concerns over inflation and capital flight,” Reuters reported late
Wednesday, citing PBOC insiders. The news also mentioned that the economic
recovery is looking increasingly shaky.
The
latest comments from the US Trade Representative’s office stating, “Early this
autumn, the US and Taiwan will begin formal negotiations on a trade
initiative,” seem to renew the fears of the US-China tussle and favor the
USD/CNH buyers.
Furthermore,
the statements from a top US diplomat for East Asia Kritenbrink also add to the
woes of the Sino-American tension over Taiwan. The diplomat said, “The US is
committed to maintaining peace and stability across the Taiwan Strait.”
Alternatively,
China Securities News mentioned, “China may issue 1.5 trillion yuan in
additional debt as part of an investment push.” The news, however, failed to
improve market sentiment and dragged the steel prices towards the south.