Steel Prices Fluctuate as Chinese Production Cuts Begin to Balance Weak Demand

Balancing Supply and Demand

Mill profitability has been severely squeezed by high iron ore costs and low finished steel prices. This has led to an increase in voluntary production cuts among major Chinese steelmakers. This reduction in supply is seen as necessary to rebalance the market, which has struggled with a surplus exacerbated by the ongoing slump in the property sector.

Export Market Vulnerability

The global trade environment for steel is becoming increasingly challenging. The threat of new tariffs and protectionist measures from major importers, including recent actions by Mexico, is jeopardizing the export 'safety valve' that Chinese mills rely on to offload surplus material. Any severe restriction on exports could quickly reverse recent price stabilization.

Infrastructure Stimulus Watch

Market participants are keenly awaiting details on government-led infrastructure stimulus. Targeted spending on public works and housing is seen as the primary catalyst needed to absorb current inventory and provide a decisive upward push to steel prices going into the new year.