Steel prices attempt rebound as pessimism exhausts, mills owners to resume production

• Steel prices eye some recovery as demand for automobiles to escalate.
• Demand for automobiles remained upbeat in June and a similar performance is expected in July.
• Construction activities to resume as monsoon may be concluded sooner.

Steel prices are eyeing a rebound after remaining in a bearish grip for the past few months. Pessimism about the steel prices is getting exhausted now and steel mill owners are returning to their production units. Earlier, steel producers halted production processes as margins were squeezed amid a significant slippage in steel prices.

To boost domestic steel production, China’s Commerce Ministry will extend anti-dumping duties on grain-oriented flat-rolled electrical steel imported from Japan, South Korea, and the EU for five years from July 23. This will boost China's steel mill owners to fire-up production capacities.

Now, steel prices are finding a cushion, and steel mill owners have chosen to resume production to cater to the likely growing needs. Automobile production is enlarging in China as China's Association of Automobile Manufacturers (CAAM) has reported a significant increase in sales data in June.

The demand for passenger cars has grown 36.9% on a monthly basis and 23.8% on an annual basis.  Also, the demand for commercial vehicles has grown 17.4% on QoQ but fell 37.4% on yoy. Going forward, the demand is expected to escalate further as zero-Covid policy implementation by the Chinese government will force them to keep themselves isolated from others.

Apart from that infrastructure projects are gearing up again after the conclusion of monsoon in various provinces of China. Earlier, heavy rains in various parts of China forced postpone of construction activities. Now, infrastructure projects and real estate will start picking up pace and eventually, the demand for steel. Investors should be aware of the fact that global recession worries will remain stable as western central banks are ready for a fresh leg of interest rate elevation to barricade price pressures.