- Steel price licks wounds at six-month low after falling nearly 500 yuan per metric tonne during the week.
- Lack of major data/events, softer USD allowed bears to take a breather.
- Fears of recession, doubts about production cuts and China’s covid conditions provide a trifecta attack on prices.
Steel Price consolidates weekly losses during Friday’s sluggish Asian session as risk-off sentiment recedes amid a light calendar and lack of major events. However, the industrial metal bears remain hopeful as pessimism surrounding the demand outlook, as well as fears of further supplies, remains intact.
That said, the most active rebar contract on the Shanghai Futures Exchange (SFE) rises to 4,230 yuan per metric tonne (mt), up 1.30% on a day by the press time. It’s worth noting that the stated October 2022 expiry bearing contract slumped nearly 500 yuan/mt during the week while dropping to the lowest levels since December 2021 the previous day.
While a pullback in the US dollar and an absence of major data/events could be linked to the latest corrective bounce in the Steel Price, the overall fundamentals remain against the bullish bias and keep the metal sellers hopeful.
Among them, the recession fears are the key as steel has more to do with industries and could witness more demand during growth years than otherwise. Further, China’s “zero covid” policy weighs on the demand from the world’s biggest industrial player and drowns the metal prices. Additionally, fears of more production, especially from Asia, also exert downside pressure on the Steel Price.
It should be noted that the global central bankers’ rush towards higher rates intensifies recession fears and challenge steel traders especially amid fragile economic conditions.
Looking forward, the steel prices could witness further downside as a lack of growth optimism joins an unattractive demand-supply matrix.