Chinese steel, metallics prices head downward

Chinese steel, metallics prices head downward

Steel output continues apace in nation, while demand may be waning.

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November 26, 2018

The month of November is coming to a close with the value of steel and iron ore dropping in China, the nation where half of the world’s steel is produced.

A Nov. 21 online article by Reuters reports the value of steel rebar dropped 5 percent in one day on the Shanghai commodities market, while iron ore pricing dropped by nearly 2 percent on the same day.

Economic analysts and speculators are reportedly concerned about a slower manufacturing and construction pace in China combined with watered down anti-pollution measures that may put more steel on the market than was anticipated earlier in the year.

In the summer and early fall of 2018, some steel mills boosted output (and some buyers padded their inventories) in anticipation of winter anti-pollution measures that would curtail production in several northern Chinese provinces.

However, in an effort to keep workers employed and output looking healthy, the national Chinese government appears to be lax in its orders to provinces to order mill shutdowns. The end result could be a steel glut and lower prices. (Unfortunately, another result could be increased pollution. On the morning of Monday, Nov. 26, the particulate matter [PM] 2.5 reading in the Chinese steelmaking city of Tianjin was 300, according to AQICN.org. At that same time, for reference, the PM 2.5 measure in Chicago was 15.)

A Nov. 25 article by Xinhua, a China-based media organization that cooperates with that nation’s government, stated that in October 2018, China’s daily output of crude steel averaged 2.66 million metric tons. Although that figure is down by 1.19 percent from the previous month, it ranked as the third highest in history, reports Xinhua.

The news organization also reports the China Iron and Steel Industry Association (CISA) as commenting that “recovering manufacturing investment and infrastructure construction would boost steel demand, as [China’s government] has taken a series of measures to ease the capital shortage facing private firms. In general, the country’s steel demand will hold steady,” according to CISA.