Chinese steel futures are falling in tandem with raw materials
On Wednesday, Chinese steel futures declined as raw material costs fell after government action to temper commodities prices, although demand for the industrial metal remained sluggish owing to output limits.
The most actively traded coking coal and coke futures on the Dalian Commodity Exchange began down 9% at 2,704 yuan and 3,430 yuan, respectively, after reaching their daily trading limits.
The drop occurred after thermal coal hit its 10% lower trading limit after the state planner stated that it had urged key coal producing provinces to investigate and regulate unlawful storage locations, as well as to crack down on hoarding behaviour.
On the Dalian exchange, benchmark iron ore futures for January delivery closed up 1% at 707 yuan a tonne, recovering from a 4.1 percent slump earlier in the session.
According to SteelHome consultancy, spot pricing for the steelmaking material with 62 percent iron content for delivery to China were constant on Tuesday at $121.5 per tonne.
“Affected by energy consumption controls, environmental curbs during winter heating season and the Winter Olympics… steel supply is expected to be restricted continuously, iron ore demand will be dented in the long term,” CITIC Securities analysts wrote in a report.
Steel rebar fell 4.3 percent to 4,655 yuan per tonne on the Shanghai Futures Exchange. Hot rolled coils, which are used in automobiles and household appliances, fell 3.6 percent to 5,032 yuan per tonne at the closing.
Stainless steel futures in Shanghai fell 2.1 percent to 19,630 yuan per tonne.
- China’s cabinet issued an action plan to bring carbon emissions to a halt before 2030, encouraging steel capacity to be reduced further, steel scrap recycling rates to be increased, and electric arc furnace technologies to be promoted.
- According to the National Bureau of Statistics, China’s industrial earnings climbed quicker in September due to robust profits in the mining and raw material manufacturing sectors, albeit high commodity prices and supply-chain issues continue to weigh on enterprises’ profitability.