FX.co ★ Steel Pulls Back from 2-Month High

Steel futures in China decreased to CNY 3,070 per tonne, down from a recent peak of CNY 3,100 reached on July 10th. This decline was prompted by signs of waning demand in the construction sector, which have tempered the outlook for essential materials. In June, domestic production of crude steel dropped sharply by 9.2% year-over-year, totaling 83.2 million tons, marking the steepest reduction in the past ten months. This broad decline indicates that manufacturers are anticipating fewer orders and are deliberately reducing their material intake. Consequently, prices have fallen as it appears that the Chinese government may not need to enforce stringent capacity cuts as it had previously indicated, which could benefit the margins of steel furnaces and mills. This policy perspective arises amid the ongoing property crisis in China and the intensification of protectionist trade measures by major steel-importing nations, which have negatively impacted demand. Earlier, major producer Baosteel projected a reduction of 50 million tonnes in national steel output this year.