Steel Rises to Over 4-Month High

Steel futures in China rose to CNY 3,300 per tonne, the highest in over four months amid the outlook of supply curbs and an improving macroeconomic backdrop. Chinese policymakers vowed to reform industrial policy to erase overcapacity in construction inputs. Such policy would aid margins for furnaces and mills as the ongoing property crisis in China and protectionist trade policies from key steel importers erode demand, already present in the latest round of earnings reports for steel mills. Consistently, crude steel production dropped to 75.5 million tonnes in June, the lowest for the month since 2018. Also, major producer Baosteel stated it expects national output to fall by 50 million tonnes this year. In the meantime, prices were supported by the announcement of a CNY 1.2 trillion hydropower plant project, signaling willingness to expand metal-intense projects. Further macro support was owed to the likelihood that the tariff truce between China and the US would be extended.