Steel price marches towards $600 on Fed-inspired softer USD, ignores Krakatau, Posco’s plans

• Steel price refreshes weekly high amid market’s cautious optimism.
• Fed’s Powell hinted at gradual pause in the rate hike cycle while announcing 0.75% rate lift.
• Indonesia’s Krakatau, South Korea’s Posco announces plan for $3.5 billion investment.
• Recession fears in the US, Japan and China test bulls, US GDP Xi-Biden talks in focus.

Steel price takes the bids to renew one-week high amid broad US dollar weakness, as well as cautious optimism in Asia during early Thursday. In doing so, the metal ignores headlines suggesting more investment in steel production, as well as fears of recession. While portraying the moves, the most active steel rebar contract on the Shanghai Futures Exchange rises to 3,980 yuan per metric tonne ($590) by the press time.

That said, Indonesia's Krakatau Steel and South Korea's Posco have signed an agreement to invest $3.5 billion starting next year to expand their production capacity in the Southeast Asian country, Indonesia's investment ministry said on Thursday, reported Reuters. The news also mentioned that the expansion will also include the production of automotive steel for electric vehicles, the ministry said in a statement.

Elsewhere, US Treasury yield curve inversion keeps signaling the fears of the US economic slowdown even if Fed Chairman Jerome Powell’s speech signaled that the hawks are running out of fuel. It’s worth noting that the US Federal Reserve (Fed) matched market forecasts by announcing a 75-bps rate increase.

Also portraying the recession risks were comments from the International Monetary Fund’s (IMF) Chief Economist Pierre-Olivier Gourinchas, not to forget looming concerns over China’s failure to return to the growth trajectory despite heavy stimulus announcements. On Wednesday, JP Morgan followed the IMF and Moody’s white citing the recession risks for the Eurozone.

Looking forward, updates from the virtual meeting between US President Joe Biden and his Chinese counterpart Xi Jinping will join the recession fears to entertain steel traders. However, major attention will be given to the flash readings of the US second quarter (Q2) Gross Domestic Product (GDP).

Also read: US GDP Preview: Win-win for the dollar? Economy's flirt with recession to boost the buck