Steel Hovers Near 1-Month Low

Steel rebar futures in China fell to below CNY 3,120 per tonne, their lowest in over one month, as markets reconsidered the scale of output cuts and fiscal support from the Chinese government. Satellite data showed that mills in China’s main production hubs continued to operate with ample capacity halfway through the third quarter despite earlier signals from Beijing that industrial policy would be revamped to counter overcapacity and the resulting threat of a deflationary spiral. This was combined with a 30% cut in output in the Tangshan hub instead of expectations of a total halt in operations ahead of Beijing’s military parade, which usually requires clear skies. On the demand front, China’s construction PMI for July fell to its lowest since January, dimming the outlook for demand of construction inputs. Additionally, the Chinese government said it would implement expansionary fiscal and monetary policy to shore up spending but refrained from signaling large-scale stimulus measures.