Steel price prints mild gains amid maintenance closures, China trade data

• Steel price rebounds from one-week low amid cautious optimism in metal markets.
• Turkish entry into global scrap market, easing fears of US-China tension over Taiwan also underpin corrective pullback.
• Maintenance closures in European steel manufacturing units, strong China trade numbers for July favor steel buyers.
• Hawkish expectations from Fed, recession fears challenge metal prices.

Steel price regains upside momentum, after Friday’s pullback to a one-week low, as concerns surrounding short-term supply deterioration join nearby demand increase. However, fears of the Fed’s aggression and economic slowdown join anxiety ahead of Wednesday’s US inflation data to probe the metal buyers.

That said, the most active contract of steel rebar on the Shanghai Futures Exchange (SFE) picks up bids to 4,125 yuan heading into Monday’s European session.

“Demand picked up in mid-July, with buyers stocking up small volumes before the August summer holidays, but this activity has since reduced with mills closing for the low season, Fastmarkets heard,” said Reuters.

Elsewhere, Turkey re-enters global scrap markets after a brief absence, which in turn helps the demand matrix and helps the metal prices. Additionally, a drop in China’s steel inventory and output figures during July offers extra strength to the steel price.

It should be noted that China’s trade numbers for June marked upbeat results with the Exports rising the most in the year, which in turn favor the latest Steel price recovery. That said, the headline Trade Balance rose to $101.26B versus $90B forecasts and $97.94B. Further details suggest that Exports increased by 18% compared to 15% expected and 17.9% prior whereas the Imports eased to 2.3% compared to 3.7% expected and 1.0% prior.

On a different page, receding fears over the US-China tussles over Taiwan also seem to favor steel buyers. Recently, Reuters came out with the news suggesting that China is up for ‘regular’ military drills east of the Taiwan Strait median line. That said, the dragon nation’s Foreign Ministry announced on Friday that they will sanction US House of Representative Speaker Nancy Pelosi over the Taiwan visit. On the other hand, Taiwan's Defense Ministry reported 66 Chinese aircraft conducting activities in the Taiwan Strait as of 5 pm local time on Sunday. Further, US Secretary of State Anthony Blinken mentioned that China's provocative actions were a significant escalation.

However, a jump in the hawkish Fed bets and fears of recession seem to challenge steel buyers. The interest rate futures signal 73% odds favoring the 75 basis-point interest rate hike at coming meetings. The odds of the Fed’s aggression jumped after the strong US jobs report for July. That said, the headline Nonfarm Payrolls (NFP) rose to 528K versus 250K expected and 398K upwardly revised prior. Further, the Unemployment Rate also inched lower to 3.5% compared to 3.6% expected and previous readings.  

Moving on, the monthly inflation numbers from the US will be crucial for the steel traders amid hopes of witnessing the fresh metal demand, especially from China.