Steel price retreats from monthly top on recession, rate hike fears, China inflation eyed

• Steel price snaps two-day uptrend at two-week high, holds lower ground of late.
• Strong US inflation propelled hawkish Fed bets, concerns over economic slowdown.
• Doubts over PBOC fix, China’s growth expectations join Taiwan-linked chatters to weigh on prices.
• Risk catalysts are important ahead of Friday’s China inflation data.

Steel remains on the back foot during the first negative day of the week, also reverses from the monthly, as the market’s previous optimism fades after the US inflation data. Also exerting downside pressure on the metal prices could be the skepticism surrounding the world’s biggest commodity user China.

That said, steel rebar on the Shanghai Futures Exchange (SFE) dropped around 1.0% while the most active contract on the London Metal Exchange (LME) declined around 1.30% at the latest.

US Consumer Price Index (CPI) for August renewed the market’s hawkish expectations from the US Federal Reserve (Fed) and renewed the recession fears, via the inverted curve of the US Treasury bond yields. That said, the US CPI rose past 8.1% market forecasts to 8.3% YoY, versus 8.8% prior regains.

The US 10-year Treasury yields rallied to 3.412% and those for 2-year bonds increased to 3.76% following the data, around 3.424% and 3.771% respectively at the latest. Furthermore, the US stocks had their biggest daily slump in almost two years after the US CPI release.

Elsewhere, doubts over the People’s Bank of China’s (PBOC) latest policy moves and the daily price fix also seem to challenge the steel buyers. “Consensus among market watchers is that the People's Bank of China has been manipulating the yuan's daily benchmark,” said Reuters.

On the same line could be the headlines suggesting Taiwan’s hosting of multiple foreign lawmakers in Washington to Push China sanctions and US lawmakers voting on financing arms for Taipei.

Alternatively, hopes of more stimulus from China and expectations of a solution to the European energy crisis seem to defend the steel buyers. In that regard, European Union (EU) Chief Ursula von der Leyen’s plans for the energy price capping and US Trade Representative Katherine Tai’s EU visit to meet European Commission Vice President Valdis Dombrovskis also favor cautious optimism.

Moving on, Friday’s China CPI and Producer Price Index (PPI) for August will be crucial for steel traders to watch for fresh impulse.