China’s steel futures came under pressure on Tuesday on renewed concerns over demand in the world’s top consumer, but managed to close above session’s lows on expectations of more government policy measures to stimulate a slowing economy.
Prices retreated as more signs emerged that China’s economy will continue to slow down. Data on Monday showed the nation’s exports unexpectedly fell the most in two years in December, while imports also contracted, pointing to further weakness in the world’s second-largest economy in 2019 and deteriorating global demand.
The state planner said on Tuesday China will aim to achieve “a good start” in the first quarter for the economy, signalling authorities could roll out more stimulus measures in the near term to counter slowing growth.
The most-active construction steel rebar contract on the Shanghai Futures Exchange closed down nearly 1 percent at 3,519 yuan ($521.06) a tonne, after rising on Monday on pre-Lunar New Year holiday restocking by traders.
Hot rolled coil dropped 0.8 percent to 3,416 yuan.
“Prices are still largely range-bound, moving up and down in small ranges,” said Richard Lu, analyst, CRU consultancy in Beijing.
“Just looking at the fundamentals of steel, there’s no big story in the market in general. Demand is currently low, but steel output remains high,” he said.
China’s 2018 crude steel output was expected to set an annual record of 923 million tonnes before slipping back to 900 million tonnes this year, Li Xinchuang, president at the China Metallurgical Industry Planning and Research Institute, said last month.
However, Lu said the demand outlook “can still change … because there are a lot of talks for economic stimulus to be rolled out this year”, including boosting infrastructure spending.
China’s steel industry will shift its focus in 2019 to optimising capacity structure, including products, location and ownership, from reducing overall capacity, Yu Yong, the chairman of China Iron and Steel Association told an industry meeting on Monday.
He acknowledged that the industry remains under pressure from oversupply due to illegally added capacity and new projects as mills try to cash in on high profit margins.
The most traded iron ore on the Dalian Commodity Exchange extended gains by 0.7 percent to close at 512 yuan, following Rio Tinto’s announcement on Monday that it had declared force majeure on some shipments after a fire hit its Cape Lambert export terminal in Australia.
Coking coal slipped 0.4 percent to 1,237.5 yuan following recent gains, but coke rose for a third straight session to close 1.2 percent higher at 2,019 yuan.
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