Shanghai steel prices fall amid trade dispute, growth worries

13 August 2018

Shanghai rebar futures pared early gains to close lower amid China’s intensified trade dispute with the United States and worries about slowing growth, although weekly inventory data showed firm demand from downstream sectors.

This week, the U.S.-China trade war escalated as the world’s two largest economies continued their tit-for-tat tariff actions. That stirred market worries about a possible slowdown in economic growth and reduced demand for commodities.

Weekly stocks of steel products in China still dipped 5,800 tonnes to just below 10 million tonnes as of Friday, data from consultancy Mysteel showed, with rebar stocks falling 2.4 percent. Hot-rolled coil stocks, however, rose 2.3 percent.

“Inventory data implies that supply and demand for steel products are generally in balance,” said analysts at Huatai Futures in a note. But analysts also noted that hot-rolled coil demand looked much weaker than rebar.

Hot-rolled coil is front-end production of cold-rolled coil, widely used in automobile, machinery manufacturing and electric appliance sectors, some of which items have been caught in the U.S.-China trade dispute.

Steel prices have been supported recently by Beijing’s efforts to fight pollution, however, and another move from the environment ministry on Friday likely prevented deeper losses.

China’s Ministry of Ecology and Environment said it will improve the monitoring of emissions from heavy industries like steel, coal fired utilities and in key regions over the coming three years, which would further curb steel output after earlier round of environmental measures.

The most-active construction steel rebar futures for October delivery closed 0.4 percent lower to 4,200 yuan ($612.80) a tonne on Friday.

Hot-rolled coil on the Shanghai Futures Exchange lost 0.6 percent to 4,171 yuan.

Spot steel products prices fell 0.1 percent to 4478.62 yuan a tonne on Thursday.

Average daily crude steel output at major steel companies over July 21-31 was at 1.91 million tonnes, down 2.5 percent compared with July 11-20, according to China’s Iron & Steel Association (CISA), curbed by the stepped up anti-pollution measures across the nation.

Steel inventory at mills also fell 7.45 percent over the same period to 11.44 million tonnes, CISA data showed.

Blast furnace utilisation rates at steel mills across the country, meanwhile, fell to 66.16 percent, the lowest since early April, Mysteel data showed.

The most-traded iron ore futures on the Dalian Commodity Exchange also edged lower during afternoon trading. The contract dropped 0.7 percent to 506.5 yuan a tonne but was still headed for its strongest weekly gain in nearly eight months, driven by active spot trading in high-quality ore.