Steel price struggles to cheer China’s output curbs amid sour sentiment

• Steel price grind higher around monthly top as China eyes further production cuts.
• China’s NDRC, CISA aim for further steel production cuts to rein in emissions.
• Sino-American tussles, and fears of economic slowdown weigh on risk appetite.

Steel price remains pressured around the one-month high flashed earlier in the day as buyers battle with the risk-off mood heading into Tuesday’s European session. That said, China’s recent steps to restrict metal production join the previously halted manufacturing due to the lower commodity prices to keep the metal buyers hopeful despite the economic slowdown fears.

While portraying the steel market’s mood, the most active rebar futures on the Shanghai Futures Exchange (SFE) seesaws around 4,041 yuan per metric tonne ($596.00), down more than 1.0% intraday. That said, prices of stainless steel drop near 0.2% daily and hot-rolled coils slump 1.3% at the latest.

“China's state planning agency, the National Development and Reform Council (NDRC) and industry group China Iron & Steel Association (CISA) met last week mandating further crude steel production cuts for the second half of 2022, according to Navigate Commodities,” said Reuters. The news also mentioned that China aims to cut annual steel production for a second straight year to curb emissions. The first-half output was down 6.5% from the same period last year.

Elsewhere, US House Secretary Nancy Pelosi’s visit to Taiwan and the likely hardships for Chinese chipmakers due to the American consideration of limiting shipments of American chipmaking equipment also weigh on the market sentiment. On the same line could be the news from a Chinese media report suggesting the dragon nation’s readiness for a military drill in Bohai, South China Sea.

Furthermore, Bloomberg’s piece signaling no hard boundaries for Beijing’s Gross Domestic Product (GDP) also appears to weigh on the market’s risk appetite. The news quotes people familiar with the matter as said, “China's top leaders told government officials last week that this year's economic growth target of "around 5.5%" should serve as guidance rather than a hard target that must be hit.”

It should be observed that the recent disappointing US PMIs tracked the last week’s US Q2 Gross Domestic Product (GDP) to portray economic fears. Also weighing on the mood could be Fed Chair Jerome Powell’s indirect signals that the hawks are running out of steam.

While portraying the mood, the US Dollar Index (DXY) refreshed the monthly low before bouncing off 105.00. Further, shares in the Asia-Pacific zone and the US stock futures print mild losses. However, US 10-year bond coupon declines 5.5 basis points (bps) to 2.55% at the latest.

Moving on, headlines surrounding China and the recession will be crucial for steel prices as the output cuts appeared to have failed in impressing the metal buyers.