Steel Prices Fall In China As Emissions Targets Are Relaxed

Despite all the media coverage and public proclamations, did we really believe China was going to force its massive steel industry to shutter capacity and retrench if it meant an impact on GDP growth?

• It seems the about-turn in prospects has come about because Beijing is concerned that cutting too much too soon will result in constraints on economic growth and has started back-pedaling on earlier directives.
• MetalMiner’s monitoring of domestic Chinese steel prices has seen numbers come off across domestic markets and across all steel forms this week.

• Despite all the media coverage and public proclamations, did we really believe China was going to force its massive steel industry to shutter capacity and retrench if it meant an impact on GDP growth?

  For a while it seemed as if they were going to follow through on their declarations. Certainly prices rallied strongly on the anticipation that steel output would be restricted and as a result scarcity would drive prices higher. On the supply side iron ore took a tumble as volumes were expected to be hit if the second half of the year experienced a sharp reduction in output.

  But although June saw a one-month fall the first half of this year has so far seen a robust increase in output to a new record, according to the FT (subscription required). Last year’s 1,054m metric ton, over a billion tons, was a record but, according to Morgan Stanley, this year is still expected to be 4-5% higher even if output falls in the second half.