Chinese steel futures fell almost 2 percent on Wednesday, dropping along with other riskier assets in Asia after a key advocate for free trade in the U.S. government resigned, stoking worries Washington will proceed with steep tariffs that could risk a trade war.
Asian equities and other commodities from oil to copper also headed south after Gary Cohn, Trump’s top economic adviser and a voice for Wall Street in the White House, said on Tuesday he would resign.
Chinese stocks reversed early gains to end lower as investors exercised caution, waiting for the impact of U.S. President Trump’s plans to impose 25 percent tariffs on steel imports and 10 percent on aluminium.
The most-active rebar on the Shanghai Futures Exchange closed down 1.6 percent at 3,890 yuan a tonne after falling as far as 3,885 yuan earlier, its lowest since Feb. 23.
It was the fourth daily drop for the construction steel product as investors await a recovery in demand.
Construction activity in top steel consumer China is only resuming gradually after last month’s Lunar New Year holiday and steel stocks have risen to nearly one-year highs as traders look ahead to a pickup in demand.
“Slowing steel demand growth in China should curb any strong steel supply growth, but elevated margins remain a key upside risk to our steel production outlook,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
Production restrictions on most Chinese cities covered by Beijing’s winter curbs will end on March 15. While some cities, including top steel-producing Tangshan, have declared they will continue with output limits after mid-March, most mills are looking forward to maximising output.
China’s infrastructure push and environmental crackdown had helped increase margins at steel producers, which this year remain well above the five-year average.
Dhar said China’s plan to close another 30 million tonnes of steel capacity this year would still leave about 200 million tonnes of spare capacity that “gives enough headroom for Chinese steel production to rise”.
The most-traded May iron ore contract on the Dalian Commodity Exchange ended 0.5 percent lower at 517.50 yuan a tonne, near a one-month low of 515.50 yuan touched earlier.
Coking coal slid 2.3 percent to close at 1,347.50 yuan per tonne, after hitting a one-month trough of 1,338.50 yuan. Coke fell 1.5 percent to 2,151 yuan.
Iron ore for delivery to China’s Qingdao port .IO62-CNO=MB fell 1.2 percent to $76.07 a tonne on Tuesday, its weakest since Feb. 6, according to Metal Bulletin.
Source: ReutersPrevious Next
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