Forex News

08:10:32 01-07-2022

Steel Price snaps six-day uptrend as recession woes supersede China’s upbeat PMI

  • Steel Price drops for the first time in seven days.
  • China Caixin Manufacturing PMI follows official activity data to portray optimism for June.
  • Chinese steel mills adopt ways to reduce high inventories amid weak domestic demand.

Steel Price justifies the market’s pessimism surrounding the economic slowdown as the benchmark rebar prices slump nearly 1.0% to mark the first daily loss in seven. In doing so, the industrial metal ignores firmer China data during Friday’s Asian session.

Construction steel rebar on the Shanghai Futures Exchange (SFE) was down 1.2% around 4,320 yuan per metric tonne after six straight sessions of gains. Further, the hot-rolled coil shed 1.3% and Stainless steel dropped 2% by the press time.

China’s Caixin Manufacturing PMI rose to 51.7 for June versus 50.1 expected and 48.1 prior. The private activity gauge tracked the official PMIs for the said month that offered positive surprises the previous day.

“Steel mills in China, the world's biggest producer of the manufacturing and construction material, have idled dozens of blast furnaces recently in a bid to reduce high inventories amid weak domestic demand,” mentioned Reuters. The news adds, “The production slowdown is also due to China's resolve to continue reducing annual steel output in line with its decarbonization goals.”

In addition to China-linked catalysts, escalating fears of the economic slowdown and cautious sentiment ahead of the key US ISM Manufacturing PMI for June, expected at 55.0 versus 56.1 prior, also weigh on the metal prices of late.

Amid these plays, the S&P 500 Futures drop 0.80% to mark a five-day downtrend whereas the US 10-year Treasury yields reverse early Asian session rebound to 2.967%, refreshing the three-week low.

Looking forward, steel traders may keep their eyes on the US data, as well as Chinese production scheduled for fresh impulse amid recession woes. Should the fears escalate, the metal prices are likely to revisit the yearly low tested the last week.

News provided by the portal FXStreet