Chinese steel futures retreated for a second-straight session on Thursday after traders bid the commodity up to a multi-year high earlier this week following news that China would extend its steel overcapacity cuts.
On Monday, the most-active rebar on the Shanghai Futures Exchange touched 3,557 yuan, its highest since April 2014. This came as China increased its crackdown on steel producers even after the country has more than reached its goals for steel output cuts this year. While China set a goal to trim steel capacity by 45 million tons in 2016, it has cut 88 million tons of steel capacity.
Even though the steel capacity cuts have impacted the market, many mills continue to increase their output later in the year to capitalize on the rise in prices. Data released on Tuesday showed that China’s crude steel output rose for a ninth straight month in November.
On Thursday, steel was moving lower following news of improved steel supply to certain parts of China. The most active rebar was recently down 1% at 3,378 yuan a ton. This was the commodity’s second-straight session of losses.
On Wednesday, steel retreated following the release of data that showed Chinese banks are on track to lend a record amount of money this year as the country moves to meet its growth targets. While Beijing’s infrastructure spending programs have been a positive for the steel market, concerns over the amount of debt being used to fund the spending have sparked concern. With debt accounting for the spending, if China’s economy cools once the spending concludes the large amount of debt will leave the government with little opportunity to implement another stimulus program.
Source:economiccalendar
Source: EDX