FX.co ★ Steel Rises to 6-Week High

In May, the futures prices for steel rebar increased to CNY 3,135 per tonne, marking their highest level in six weeks. This rise reflected a stronger trend in ferrous metals due to anticipated improvements in trade flows. A temporary détente in the trade tensions between the US and China, exemplified by their mutual reduction of bilateral tariffs over a three-month period, has alleviated fears about declining manufacturing demand and a weakening consumer market this year.

Concurrently, Baosteel has indicated that it is likely Beijing will enforce a nationwide reduction in steel production to address issues of overcapacity and the ongoing sluggishness in the construction sector. Though specific details regarding the scale of the reduction have not been released, some reports suggest a potential decrease in supply by 50 million tonnes this year. The positive momentum in futures was slightly hindered by speculation that Beijing might revise national regulations to prevent the sale of homes before they are completed. Should this regulation be enacted, it would eliminate a vital funding source for leading property developers, exacerbating financial pressures on the heavily indebted real estate sector and consequently diminishing steel demand from this significant customer group.