- Steel
prices have comfortably established below $100.00 amid trimmed demand
forecasts.
- Resurgence in China’s Covid-19 situation
may worsen demand for steel.
- Downbeat Caixin Manufacturing PMI has
dented the market sentiment.
Steel prices are continuously
auctioning below $100.00 for the past three weeks as market veterans are
trimming steel demand forecast due to the lack of construction activities in
China. As individuals are dodging mortgages to the banking sector, critical for
real estate and construction activities, steel demand is fading dramatically.
Steel mill owners are banking
on production cuts as steel stockpiles are accelerating faster due to weak demand
in China. Major Angang Steel Co., near Beijing, cited that “it sees tough
conditions persisting through the end of the year”.
The Chinese authorities are aware of the fact that the overall demand is
dropping vigorously, which forced the People's Bank of China (PBOC) to adopt a
‘dovish’ stance on the Prime Lending Rate (PLR). It is worth noting that the
PBOC trimmed its one-year PLR and five-year PLR by five and 15 basis points
(bps) respectively. Also, economic stimulus is around the corner to spurt economic
activities and eventually the growth rate.
Meanwhile, a resurgence in
Covid-19 in China has refreshed fears of recession ahead. Major provinces of
China have announced lockdown curbs to contain the Covid-19 spread. This may
further result in a decline in overall economic activities.
Besides that, China’s Caixin
Manufacturing PMI has trimmed to 49.5 against the consensus of 50.2 and the
prior release of 50.4. This has soared signs of de-growth in China and it would
be worthy of dictating that the steel demand would have also declined in
August.