New virus concerns and record high steel production in China
by David Fleschen
After the noticeable correction last Thursday and the cautious end of the week on Friday, the industrial metals start the new trading week with a weak undertone. Copper falls by almost 2% below $5,700 per ton, aluminum and nickel are down a good 1%. Apparently worries about a second wave of coronavirus infection are keeping prices in check. Over the weekend, the Chinese capital, Beijing, reported numerous new cases and subsequently sealed off residential areas. In addition, the virus continues to spread rapidly in South America and countries such as the USA, Russia, India and South Africa are reporting high numbers of new infections. This morning, not too positive economic data from China should also contribute to the price decline of metals. Although industrial production continued to recover in May, according to data from the National Statistics Bureau, the 4.4% year-on-year increase was lower than expected. Fixed capital formation (-6.3%) also fell short of expectations.
In line with overall industrial production, China continued to expand its steel production in May: The reported 92.3 million tons or 2.98 million tons per day actually represent a record level. After the first five months of the year, steel production is also on record course for the year as a whole at just under 412 million tonnes. The 1 billion tonne mark is within reach. Since the beginning of April, steel prices have been rising in China, making steel production more profitable. In addition, demand for steel has risen, among other things due to stimulus measures focusing on infrastructure. This development could already be seen in the trade balance, which had shown lower steel exports from China. High steel production brings with it a high demand for iron ore, so that the iron ore price is well supported at around USD 100 per tonne.
Source: Commerzbank Research, Photo: Fotoalia