Steel Prices Hammered By China’s Zero-Covid Flip-Flop

Steel Prices Hammered By China’s Zero-Covid Flip-Flop

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By Ag Metal Miner – Dec 01, 2022, 1:00 PM CST

  • China recently sent a shockwave through metals markets on rumors that it was going to relax its zero-Covid restrictions.
  • A fresh wave of lockdowns poured cold water on the rallies.
  • Macroeconomic and geopolitical factors are pulling metal markets in all directions.

Via AG Metal Miner

Uncertainty regarding China’s stance on zero-COVID, when restrictions might ease, and riots within China throughout recent weeks have all contributed to more flat steel prices. What’s more, recession fears are starting to notably impact commodities.

Yet another contributing factor? Fears of a railroad strike. With the cut-off date for meeting railroad unions’ terms fast approaching, buyers and suppliers are getting nervous. If a strike were to happen, it would significantly disrupt domestic steel logistics, a point MetalMiner touched on previously. While the chances of a strike remains low due to the crippling effects it would cause, fears still loom. As long as they last, steel prices will continue to bear the brunt.

Steel Prices: Trends and Possible Directions

For the past three months, HRC steel prices have steadily declined. Currently, prices continue to reach toward demand zones. Despite this, it’s unwise to rule out a reversal, especially if a railroad strike comes to pass. For the moment, however, prices and the short-term price trend continue to fall.

Numerous macroeconomic and geopolitical factors will continue to test steel prices. These include China’s zero-COVID initiatives, Europe’s energy crisis, and ongoing demand decreases. US Midwest domestic HRC steel futures inched up slightly on only six of the past 30 days. In fact, the highest record increase was just 1.66%. For the most part, futures dropped most days, with the lowest day hitting a 4.65% decrease.

Everyone is to hold their breath with a possible reversal still on the table (at least in the short term). After all, the looming railroad strike could turn steel prices in either direction, depending on the outcome.

By the MetalMiner Team

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