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Steel prices have struggled to cheer China’s support measures amid fears of a recession

  • Steel prices rose to six-week highs amid China’s efforts to tame fears of an economic slowdown.
  • China’s state planners are pushing for more measures to keep the economy afloat as PBOC rate cuts fail to please optimists.
  • A rise in Chinese steel production will challenge metal buyers amid hawkish Fed fears, slowing yields.

Steel prices were slightly bid up in Europe early Tuesday as traders took China’s efforts to revive economic optimism with a pinch of salt. Despite recent weakness in US data, recent increases in Chinese manufacturing and passive bond markets amid promises of aggressive rate hikes from the Fed are weighing on the industrial metal.

Steel rebar futures on the Shanghai Futures Exchange (SFE) gained 0.3% at around 4,170 yuan per metric ton. However, Shanghai hot-rolled coil slipped 0.3% intraday while stainless steel fell 0.4% in recent days.

“Chinese regulators have instructed state-owned China Bond Insurance Co. Ltd to guarantee onshore bond issuances by some private property developers,” Reuters reported on Monday.

It is worth saying that China’s state planning National Development and Reform Commission (NDRC) has announced many measures to avoid the fear of recession, “We pledge to keep the economy within reasonable limits.” The NDRC approved 65 fixed-asset investment projects worth a total of 1.028 trillion yuan in January-July, per Reuters. News cited that the NDRC approved 8 real estate investment projects worth a total of 236.8 billion yuan in July.

On a separate page, Reuters reported data showing an increase in China’s steel output, challenging metal buyers amid hopes of higher supply, contrasting with fears of an economic slowdown. “Average daily crude steel production at member mills of the China Iron and Steel Association in the first 10 days of August rose 2.8%, or 53,100 tonnes, to 1.94 million tonnes from the end of July,” consultancy and data provider MySteel reported, Reuters reported.

Looking ahead, steel traders should expect metal prices to grind further northwards amid key consumer efforts to revive demand concerns. However, a recession can challenge upside momentum. Fed minutes are also important to watch as the US central bank decides on its next move.

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