Stell rises to over four-month high

Steel futures in China surged to CNY 3,300 per tonne in July, marking the highest level since early March, driven by expectations of lower supply and signs of a potential demand recovery. The rally reflects growing market confidence that Beijing's renewed focus on industrial reform and infrastructure stimulus will help rebalance the steel market after a prolonged period of weakness.

Chinese policymakers recently reaffirmed their commitment to eliminating excess capacity in construction-related sectors, including steel, cement, and other heavy industrial inputs. The announcement came amid mounting pressure on steelmakers from declining property-related demand and rising trade protectionism from major importers such as the U.S. and EU, which have either imposed or are considering higher tariffs on Chinese steel products.

By curbing overcapacity, the government aims to support profit margins for domestic producers and reduce the risk of dumping accusations abroad.

In line with these efforts, crude steel production in China dropped to 75.5 million tonnes in June, the lowest output for that month since 2018. The decline points to early signs of supply-side discipline taking effect. Major producer Baosteel further reinforced this trend by stating it expects national output to fall by 50 million tonnes this year, underscoring expectations of a tighter market in the second half of 2025.

Adding to the bullish sentiment, the Chinese government announced a massive CNY 1.2 trillion hydropower plant project, which is expected to significantly boost demand for steel, particularly in the construction and engineering segments.

The project is not only a positive signal for steel consumption but also a clear indication that Beijing remains committed to using infrastructure investment as a counter-cyclical tool to cushion the broader economy amid ongoing challenges in the real estate sector.

Beyond hydropower, analysts expect additional stimulus to be channeled toward urban redevelopment, transport, and renewable energy infrastructure, all of which require substantial steel inputs. This infrastructure-driven demand, combined with production curbs, has created a more supportive price environment, with traders and producers anticipating a more balanced market in the months ahead.

Overall, while short-term volatility remains possible due to external factors such as global economic uncertainty and geopolitical tensions, the medium-term outlook for China’s steel sector appears to be improving. If policy support continues and capacity reduction efforts hold, steel prices may remain elevated, offering relief to mills that have faced squeezed margins for much of the past year.

Chiedi a ChatGPT