Steel price struggles to cheer China support measures amid recession fears

• Steel price grinds higher around six-week top amid China’s attempt to tame economic slowdown fears.
• China’s state planner braced for more measures to keep the economy afloat as PBOC rate cut fails to impress optimists.
• An increase in Chinese steel output also challenges metal buyers amid fears of hawkish Fed, sluggish yields.

Steel price remains mildly bid as traders take China’s efforts to revive economic optimism with a pinch of salt during early Tuesday in Europe. Also exerting downside pressure on the industrial metal is the recent increase in China’s output and inactive bond markets amid hopes of aggressive rate hikes from the Fed, despite the latest weakness in the US data.

That said, Steel Rebar Futures on the Shanghai Futures Exchange (SFE) gained 0.3% around 4,170 yuan per metric tonne. However, Shanghai hot-rolled coil slipped 0.3% intraday whereas stainless steel dropped 0.4% on a day at the latest.

“Chinese regulators have instructed state-owned China Bond Insurance Co. Ltd. to provide guarantees for onshore bond issuance by a few private property developers, Reuters reported on Monday,” said Reuters.

It’s worth noting that China’s state planner National Development and Reform Commission (NDRC) announced multiple measures to avoid recession fears as it said, “We pledge to keep the economy within reasonable bounds.” The NDRC approved 65 fixed-asset investment projects worth a total of 1.028 trillion yuan in Jan July, per Reuters. The news also mentioned that the NDRC approved 8 fixed-asset investment projects worth a total of 236.8 billion yuan in July.

On the different page, Reuters conveyed data showing an increase in China’s steel output, which in turn challenges the metal buyers amid hopes of more supply, in contrast to the economic slowdown fears. “Average daily crude steel output among member mills of China Iron & Steel Association during the first 10 days of August rose 2.8%, or 53,100 tonnes, to 1.94 million tonnes from late July, consultancy and data provider Mysteel reported,” per Reuters.

Looking forward, steel traders should expect further grinding of the metal prices towards the north amid efforts from the major customer to renew demand concerns. However, a looming recession could challenge the upside momentum. Also important to watch will be the Fed Minutes amid indecision over the US central bank’s next move.