U.S. tariff threat cuts Shanghai steel rally, iron ore slides
1 August 2018
China’s steel futures pulled back after hitting their highest level since 2013 on Wednesday as news that the United States could slap higher tariffs on $200 billion of imported Chinese goods halted a rally that pushed prices 10 percent last month.
But traders say Beijing’s sustained campaign to curb industrial production, including steel, to fight pollution would keep prices elevated. Iron ore prices fell nearly 3 percent.
Many cities across China have either shut or cut output of industrial plants, including steel mills, with the city of Changzhou in Jiangsu, China’s No. 2 steelmaking province, the latest to issue similar orders.
“This is the kind of situation that will last at least until the end of this year because the supply-side restrictions are part of a long-term policy,” said a Shanghai-based trader.
The most active October rebar on the Shanghai Futures Exchange rose as much as 2.1 percent to 4,243 yuan ($623) a tonne, its strongest since February 2013, before ending 0.4 percent lower at 4,139 yuan.
Prices of other commodities including copper and oil also slid after a source familiar with the Trump administration’s plans said it will propose slapping a 25 percent tariff on $200 billion of imported Chinese goods after initially setting them at 10 percent, in a bid to pressure Beijing into making trade concessions.
But Chinese steel prices will be supported by tighter steel supply and with demand spurred by government infrastructure projects, the Shanghai trader said.
Chinese steel producers have expectedly raised prices. Jiangsu Shagang Group, China’s biggest private-owned steel mill, said on Wednesday it had raised its rebar prices for August by 100 yuan a tonne and some plates by 50 yuan a tonne.
The restrictions in steel production have reduced demand for steelmaking raw material iron ore, whose supply remains high, pressuring prices.
The most-traded September iron ore on the Dalian Commodity Exchange dropped 2.6 percent to 475 yuan a tonne. Coking coal fell 1.7 percent to 1,186.50 yuan.
“For iron ore, there’s still plenty of supply and demand is really affected by these (steel) production curbs,” the Shanghai trader said.
Stockpiles of iron ore at major Chinese ports stood at 155.68 million tonnes on July 27, not far below a record 161.98 million tonnes reached in early June, according to data tracked by SteelHome consultancy. SH-TOT-IRONINV
Spot iron ore for delivery to China’s Qingdao port .IO62-CNO=MB rose 0.8 percent to $68.19 a tonne on Tuesday, according to Metal Bulletin.