Steel price extend losses after three-day consolidation as China oversupply fears escalate

• Steel prices have witnessed a steep fall after a three-day consolidation.
• Oversupply of steel has pushed the steel prices to four-month lows.
• Zero Covid-19 policy in China will keep the steel prices on the tenterhooks.

Steel prices have weakened further after a three-day consolidation on the Shanghai Futures Exchange. The asset has renewed its four-month lows as fears of overproduction of steel by China, the biggest consumer of building materials have escalated.

The zero-Covid policy by the Chinese administration has dented the demand for steel due to a halt in manufacturing activities. The Chinese economy is facing the headwinds of the resurgence in the Covid-19 pandemic. For the past three months, the Chinese manufacturing capacities are operating with extreme lockdown curbs. A strict restriction on the movement of men, materials, and machines has resulted in a serious fall in steel prices.

New data from Global Energy Monitor's Global Steel Plant Tracker states that the steel industry could face $518 billion in stranded asset risk as countries work towards meeting their long-term carbon neutrality commitments, if the 345.3 million tonnes per annum (mtpa) of emissions-heavy blast furnace basic oxygen furnace capacity (BF-BOF) proposed or under construction is fully developed, as per SME Times.

Earlier, supply constraints of steel were dictating the asset prices as most of the economies were committed to meeting their long-term goal of carbon neutrality commitments. Now, renewed demand worries in China due to the pandemic and heavy rains in some parts of China have pushed the steel prices significantly lower.