Steel Prices Under Pressure After China Releases Housing Data

20 July 2016

Chinese steel futures remain under pressure, hit by the latest economic data out of China, which showed that home prices slowed in June for the second-straight month, suggesting that the construction-led economic rebound in the country is losing steam.

The poor housing data in itself is a negative for the steel market, but there could be a silver lining. If Chinese economic data continues to disappoint, it will open up the possibility for another round of economic stimulus, and that could be good news for the steel market.

Chinese steel futures on Tuesday fell up to 7% in intraday trade, with prices falling to 2,305 yuan ($US344.10) per metric ton, their lowest price point in July. The decline comes against a background of higher prices, with the steel market seeing increases recently on solid demand and lower inventories. Still, the expectations are that steel prices will weaken in the second-half of the year, which is a typical part of commodity demand seasonality. Rebar futures, which have also seen some positive momentum recently, have come under pressure this week, falling to a one-week low.

In other Chinese steel market news, Beijing said it will allow foreign companies to set up wholly-owned steel manufacturing units in four pilot free trade zones, as part of a policy relaxation designed to attract foreign investment in various industries. Foreign firms will no longer be subject to various qualification requirements and stake control restrictions when investing in China’s steel industry. Whether or not foreign companies are interested in capitalizing on this remains to be seen, but it is an interesting strategy in an industry where the government has been accused of protecting its domestic steel companies.


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