FX.co ★ Steel Rises to Over 4-Month High

Chinese steel futures surged to CNY 3,300 per tonne, marking the highest level in over four months. This increase comes amid expectations of supply restrictions and a more favorable macroeconomic environment. Chinese authorities have pledged to reform industrial policies to eliminate excess capacity in construction materials. This initiative is expected to bolster profit margins for smelters and mills, countering the effects of China's ongoing property crisis and protectionist trade measures from significant steel-importing countries, which have diminished demand—a trend reflected in recent earnings reports from steel producers. In line with these developments, crude steel production dropped to 75.5 million tonnes in June, the lowest for that month since 2018. Additionally, leading producer Baosteel projected a national output decrease of 50 million tonnes this year. In the meantime, prices found support with the announcement of a CNY 1.2 trillion hydropower plant project, indicating a commitment to expanding metal-intensive initiatives. Further macroeconomic support came from the likelihood of an extension in the tariff agreement between China and the US.