• The price of steel is licking wounds at its lowest level in six months after falling nearly 500 yuan per metric ton during the week.
  • The lack of major data/events, the weaker USD allowed the bears to breathe a bit.
  • Recession fears, doubts over production cuts and China’s covid conditions provide a triple attack on prices.

Steel prices consolidate weekly losses amid Friday’s slow Asian session as risk sentiment recedes amid a light calendar and lack of major events. However, industrial metals bears remain bullish as pessimism surrounding the demand outlook, as well as fears of additional supplies, remain intact.

That said, the most active rebar contract on the Shanghai Futures Exchange (SFE) stands at 4,230 yuan per metric ton (mt), up 1.30% on a day as of we are putting to press. It should be noted that the contract carrying the declared expiry of October 2022 fell by almost 500 yuan / ton during the week while falling to the lowest levels since December 2021 the day before.

While a pullback in the US Dollar and an absence of major data/events could be tied to the latest corrective rebound in steel prices, overall fundamentals remain against the bullish bias and keep metal sellers hopeful.

Among them, recession fears are key as steel has more to do with industries and may see more demand in boom years than not. In addition, China’s “zero covid” policy is weighing on demand from the world’s largest industrial player and drowning metal prices. Additionally, fears of increased production, particularly from Asia, are also putting downward pressure on the price of steel.

It should be noted that the global central bankers’ rush for higher rates is intensifying recession fears and challenging steel traders, especially in fragile economic conditions.

Going forward, steel prices could see a further decline as a lack of optimism for growth joins an unattractive supply-demand matrix.