FX.co ★ Steel Holds Slight Pullback

Steel rebar futures have softened to CNY 3,095 per tonne, down from the six-week high of CNY 3,135 recorded on May 13th. This adjustment comes in response to potential policy changes affecting home purchases in China, impacting the construction industry's outlook. The Chinese government has indicated plans to reform laws to prohibit the sale of homes prior to their completion. Such a regulation would eliminate a crucial funding mechanism for major property developers, exacerbating the existing financial strain in the heavily indebted sector and consequently reducing steel demand from key consumers. This development counteracts speculation that Beijing might reduce steel production quotas this year due to waning housing demand and protectionist trade measures, which pose threats of overcapacity in the industry. Supporting this speculation, Boasteel has hinted that capacity reductions could lead to a 50 million tonne decrease in output this year. Meanwhile, the latest figures reveal that China's steel production in April remained stable compared to the previous year, totaling 2.6 million tonnes.