Steel price licks its wounds as recession fears escalate

• Steel price struggles to defend the corrective pullback as China-linked pessimism spreads.
• US holidays help countertrend traders amid a sluggish session.
• Typhoon in South Korea, emission-led production halt in China battle fears of economic slowdown.

Steel price portrays a corrective pullback around the monthly low but stays pressured amid an inactive trading session during the early Monday morning in Europe.

The metal’s recent rebound could be linked to the fears of more supply crunch as South Korea prepares for a very strong typhoon. Also likely to have triggered the rebound is the cautious optimism in the market after the previous day’s downbeat US jobs report.

US employment data marked mixed readings as the headline Nonfarm Payrolls (NFP) rose past 300K forecast to 315K, versus 526K prior, but the Unemployment Rate rose to 3.7% compared to 3.5% expected and prior. Further details reveal that the Average Hourly Earnings reprinted 5.2% growth for August, a bit lesser than the 5.3% market consensus. Also, Factory Orders dropped to -1.0% for July compared to 0.2% forecasts and 1.8% in previous readings.

Additionally favoring the metal price could be the recent slowdown in the Chinese production of the metal as Beijing pushes factories for emission targets. On the same line are covid-led lockdowns in the key steel-producing regions of China.

Even so, the recession fears emanating from the European energy crisis join the coronavirus woes in Beijing to weigh on the metal prices. Furthermore, hawkish central bank moves and the Sino-American tussles are extra challenges for the metal traders.

Earlier in the day, China’s Caixin Services PMI dropped to 55.0 in August, versus 55.5 in prior readings. In doing so, the private activity gauge traced the major PMIs from the dragon nation that recently signaled pessimism for the world’s largest industrial player.

Moving on, a lack of major data/events and the US holiday may test the steel traders but the bears are likely to keep the reins.