FX.co ★ Steel Gains Traction

Steel futures in China surged to CNY 3,250 per tonne, marking the highest point since hitting a seven-month peak of CNY 3,345 on July 29. This increase was fueled by renewed anticipation of capacity cuts within China's steel industry. Recent reports indicate that Chinese authorities have instructed several steel mills to temporarily suspend production this month due to air pollution concerns. This follows policy-makers' commitments to reduce overcapacity in construction materials, a move likely aimed at curbing the country's deflationary trends. Consequently, Baosteel has expressed expectations that domestic production will decline by 50 million tonnes this year. Meanwhile, consumption has remained stable, as evidenced by Chinese steelmakers importing over 100 million tonnes of iron ore in July, marking a 1.8% year-on-year increase. Additionally, steel exports have surged by 11.4% annually to date, representing the largest increase for the period on record, despite prevalent protectionist trade measures worldwide.