Steel price extends recovery on robust sales growth, China CPI in focus
- Steel prices are eyeing more recovery in prices as demand rebounds.
- China’s decarbonization goals are likely to trim in the second half of CY2022.
- This week, China’s inflation data will be of utmost importance.
Steel prices have rebounded sharply after bottoming out in July as demand forecasts have improved after robust iron ore purchases in July. China’s iron ore purchases have risen by 3.1% in July from a year earlier and by 3% on monthly basis. The conclusion of the monsoon season in various provinces of China and other parts of Asia has compelled the think tanks in the market to step up their forecasts for steel demand.
Earlier, steel prices were declining abruptly on China’s ailing real estate sector and decarbonization goals. Construction activities for domestic real estate and infrastructure were halted whose consequences were faced by steel mill owners. The steel mill owners were facing losses due to a pile-up of steel stockpiles. Therefore, a halt in production was relevant for them rather than continue operating the furnace.
Also, the market participants are hoping that decarbonization goals in China will decline and the steel mill owners would be able to accelerate productivity.
On the economic data front, investors are awaiting the release of China’s Consumer Price Index (CPI), which is due on Wednesday. As per the market consensus, China’s inflation is expected to shift higher to 2.9% from the prior release of 2.5%. An increment by 40 basis points (bps) could force the People’s Bank of China to sound neutral rather than featuring a dovish stance. This might have a significant on the steel prices ahead.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
