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Steel prices are struggling to cheer softer US inflation on China concerns

  • Steel prices are under pressure as a softer US dollar fails to impress buyers amid concerns over China, costing at home.
  • Higher coke prices, easing production pressures, weighed on metal prices.
  • As headlines surround China, US consumer sentiment will be key to fresh stimulus.

In Europe early on Thursday, steel prices pared gains following US inflation as traders failed to cheer a softer US dollar amid fears of higher output and higher costs and lackluster demand. On the Shanghai Futures Exchange (SFE), construction steel rebar fell 0.1% while hot-rolled coil gained 0.1%. Furthermore, stainless steel was up 0.9% at press time.

Given the recent mixed performance of steel traders, Reuters said, “Steel mills have restarted some of their idled blast furnaces in recent days, boosted by improved margins and a pickup in demand from the construction sector.”

The medium-term demand outlook for steel products and ingredients is clouded by a number of issues such as mandatory steel production cuts in China aimed at curbing emissions, the financial crisis engulfing Chinese property developers and COVID-19 lockdowns, the news analysis said.

Elsewhere, mixed comments from Fed policymakers joined China-linked news surrounding the Sino-American trade war, Covid and Taiwan to weigh on market sentiment and steel prices.

Recently, Mary Daly, president of the San Francisco Fed, hesitated to declare victory over inflation, with the US consumer price index (CPI) falling 8.5% in July, versus 8.7% expected and 9.1% for the year before. In doing so, policymakers joined the likes of Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans. Earlier, the Fed’s Kashkari cited the need to raise the Fed’s policy rate to 3.9% by the end of the year and 4.4% by the end of 2023 as he “didn’t see anything that would change.” Furthermore, Fed policymaker Evans said, “The economy is a bit more fragile, but it would take something adverse to trigger a recession.” The Fed’s Evans also called inflation “unacceptable.”

Talking about China-related news, Reuters relied on sources to mention that US President Biden will reconsider actions on China tariffs in the wake of Taiwan’s response. Additionally, a jump in coronavirus cases from China, to 700 new confirmed cases on the mainland on August 10 and 444 a day earlier, weighed on the pair. Furthermore, China Customs’ recent rejection of US meat by certain producers and comments by Taiwan’s Foreign Ministry indicate a rejection of China’s motto of ‘one country, two systems’.

Looking ahead, US jobless claims and the monthly Producer Price Index (PPI) for July. Furthermore, Friday’s preliminary readings of the US Michigan consumer sentiment index for August were key to fresh stimulus.

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