Steel Prices Stable Amid Optimism Over China’s Property Sector

Chinese steel prices may have edged down on Monday, but the commodity remains supported near recent highs due to investors’ bullish expectations on growth in China’s property sector.

Concerns that China’s moves to cool its red-hot property sector would dent steel demand have been a bit of a dark cloud hanging over the market in recent months, but these concerns were abated last week after China reported a surge in property sales in the first two months of the year. The surge in sales also suggested that China’s policies are becoming ineffective at cooling property prices and that growth may continue despite the government’s attempts to rein it in.

Meanwhile, China is pointing out that the fight against excess steel capacity should be undertaken globally, and that China should not bear all of the burden. “China should not be singled out in a fight against excess steel capacity that requires stronger global cooperation”, Wang Shouwen, a vice commerce minister, said on Saturday according to Reuters. China has recognized the seriousness of overcapacity problems in some industries and has been trying to deal with the issue, while some other countries have been “just talking and watching”, Wang added.

China has pledged to cut steel overcapacity by 50 million metric tons this year, on top of the 65 million tons cut in 2016. However; Greenpeace has pointed out that most of the cuts in 2016 were from already idled plants. China’s steel exports took a big hit in 2016 as countries implemented protectionist measures. China has denied that it unfairly boosts its domestic steel producers.

On Monday, the most-active rebar on the Shanghai Futures Exchange declined 0.2% to reach 3,581 yuan ($519) a ton. Last Wednesday, it reached a three-year high of 3,692 yuan.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.