FX.co ★ Steel Pressured by Weak Fundamentals

Steel rebar futures remained below CNY 3,100 per ton, under sustained pressure from weak market fundamentals. Persistently high coke prices continued to erode steelmakers’ profit margins, leading some producers to scale back operations and carry out maintenance. Industry data showed that the profitability of Chinese steel mills dropped sharply to 7.79% in the latest week.

Demand for steel in China further deteriorated in the third quarter amid a continued slowdown in construction activity. Data indicated that new home prices in China extended their declines in August, underscoring the persistent drag from the country’s prolonged property downturn.

At the same time, China’s leading industry association reportedly called on steelmakers last month to voluntarily cut production in an effort to reduce inventories and restore profitability after a difficult first half of the year.