Steel prices extend losses on growth concerns, revival is on cards

• Steel prices have displayed a vulnerable performance after a cautious stance by western central banks.
• China’s NBS Manufacturing PMI has improved to 49.4 vs. 49.2 as expected.
• The conclusion of the monsoon season and supportive PBOC may revive steel demand.

Steel prices have remained vulnerable this week after the hawkish stance by Western central banks at the Jackson Hole Economic Symposium trimmed growth prospects. The asset is declining like a house of cards as central banks have preferred taming inflation over declining manufacturing activities.

Delegates at the Jackson Hole highlighted the risk of soaring price pressures in the world economy. Households are facing the wrath of higher prices and also Earnings before Interest and Depreciation and Amortization (EBITDA) margins in the corporate have trimmed dramatically.

There is no denying the fact that declining liquidity from the market is also impacting the private sector but bringing price stability is the foremost priority as earnings data is still vulnerable and households are facing difficulty in offsetting the higher payouts.

Meanwhile, China’s official indicator of manufacturing PMI is indicating higher usage of steel last month. China’s NBS Manufacturing PMI has landed at 49.4, higher than the estimates of 49.2 and the prior release of 49.0. This indicates that demand for steel should have been decent in August. Also, the concluding monsoon season may accelerate demand in the world’s second-largest economy.

Monsoon season is known for halting construction activities and eventually demand for metals too. As monsoon season is concluded in major provinces of China, demand for steel is expected to heat up again. Also, supportive monetary policy by the People’s Bank of China (PBOC) will revive steel as expenditure on automobiles, infrastructure, and other construction activities will scale up again.