Steel prices advance as monsoon seems over in China, auto sales accelerate

• Steel prices have rebounded firmly as higher passenger vehicles retail sales escalate hopes for recovery.
• Russia is offering steel at lucrative discounts to cater mass market of Asia.
• The conclusion of the monsoon will resume construction activities in China.

Steel prices have advanced as the monsoon season is about to over in most provinces of China and the demand will recover soon. The resumption of construction activities for real estate and infrastructure will bring a revival in the demand for steel and the corresponding prices may accelerate further.

Production of steel in China has remained vulnerable after the announcement of export duty of 15% on selected pig iron, flat-rolled products of iron or non-alloyed steel, bars and rods, and various flat-rolled products of stainless steel, as per The Hindu. The export market of steel in China has witnessed a serious slump after the sanctioning of export duty and the pledge of saving the environment from the harmful effects of steel production.  

Meanwhile, Russia is planning to escalate exports of steel at cheaper prices to cater to a large market in Asia. However, the payment mechanism will remain critical as the US abandoned Russia from the SWIFT payment mechanism after it invaded Ukraine. Russia is providing attractive discounts to address the mass market of Asia, which might force China to sum up its export duty levied on steel.

On the demand front, retail sales of passenger vehicles remained upbeat in July 11-17 after remaining 16% higher on an annual basis and 20% higher on a weekly basis.  A gradual improvement in the overall demand after remaining muted due to the arrival of the monsoon may advance the steel price vigorously.