FX.co ★ Steel Holds Pullback

Steel rebar futures experienced a decline, settling at CNY 3,100 per tonne from the recent six-week high of CNY 3,135 reached on May 13th. This drop was influenced by upcoming changes to Chinese housing policies, casting uncertainty on construction activities. The Chinese government is planning to revise existing regulations to prohibit the sale of homes before their completion. Such a rule would eliminate a crucial financing source for major property developers, potentially exacerbating financial stress in the already debt-burdened sector, and consequently dampening steel demand from these primary consumers. These developments offset reports that Beijing intends to reduce steel output quotas for the current year, a response to declining housing demand and concerns over potential repercussions from protectionist trade measures due to overcapacity within the sector. Supporting this speculation, Baosteel indicated that production cuts could lead to a reduction of 50 million tonnes this year. Meanwhile, the latest figures reveal that China's steel output for April remained steady compared to the previous year, holding at 2.6 million tonnes.