Steel dropped amid continued uncertainty regarding China

  • Kedia Advisory
  • Commodities News
Steel dropped amid continued uncertainty regarding China
Credit: © Reuters.

Steel prices settled down by -0.44% at 45,000 amid continued uncertainty regarding Chinese resource demand after the Golden Week holidays. This uncertainty was primarily driven by concerns surrounding the financial woes of major Chinese construction companies, such as Evergrande and Country Garden. These companies' debt restructuring efforts and fears of financial contagion in China's debt-ridden construction sector contributed to market apprehension. Furthermore, the halt in construction of numerous projects by key developers added to the strain on steel buying, limiting one of its primary sources. 

To compound matters, Chinese mills reported lower profits, prompting them to increase purchases of cheaper Indian iron ore, which significantly reduced input prices. Despite these challenges, there were some positive signs in the market, with the latest manufacturing PMIs indicating improved sentiment and limited declines. 

Looking at global crude steel production, there was a 2.2% increase in August 2023, reaching 152.6 million tonnes, compared to 149.5 million tonnes in the same period the previous year. Over the January-August period, steel production in the 63 nations representing 97% of global steel output inched up by 0.2%. China, the world's top producer, recorded a 3.2% increase in steel output, reaching 86.4 million tonnes in August. For the January-August period, China's output increased by 2.6% to 712.9 million tonnes. 

From a technical perspective, the market is currently witnessing fresh selling, with open interest increasing by 55.22% to 1040. Prices have dropped by -200 rupees, and the steel market is now finding support at 44,890, with the potential for further testing at 44,780. On the upside, resistance is likely to be encountered at 45,210, and a move above this level could see prices testing 45,420.

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