Steel Rises Amid China Output Curbs

Steel rebar futures climbed above CNY 3,070 per ton, nearing four-week highs as Chinese authorities ordered production cuts across northern steelmaking hubs to curb pollution during the annual sessions of the National People's Congress. Under the so-called “blue skies” directive, mills were instructed to reduce blast furnace output by 30% for one week starting March 4 to limit emissions in Beijing during the high-profile political meetings. Tighter supply has provided short-term support to prices, as reduced output typically improves profitability and margins for steel producers. However, demand in top consumer China remained soft following the Lunar New Year holiday, and analysts expect steel consumption to ease in the first half of the year amid persistent weakness in the property sector and cautious industrial activity.

Steel rebar futures fell below CNY 3,060 per ton, giving back recent gains after Chinese authorities instructed mills in Northern China to temporarily scale back operations to curb pollution during the annual sessions of the National People's Congress. Under the so-called “blue skies” directive, mills were required to cut blast furnace output by 30% for one week starting March 4 to limit emissions in Beijing during the high-profile political gatherings. Investors also continued to gauge demand conditions in top consumer China, where economic activity has remained subdued following the Lunar New Year holiday. Analysts expect steel consumption to soften in the first half of the year amid lingering property sector weakness and cautious industrial activity. Meanwhile, the industry is monitoring potential trade repercussions after the US Supreme Court’s ruling on tariffs, which could prompt additional protectionist measures.

Steel rebar futures climbed above CNY 3,060 per ton in late February, rebounding from multi-month lows as economic activity in China accelerated following the extended Lunar New Year holiday, with mills expected to ramp up production. However, analysts anticipate that China’s steel demand will weaken in the first half of the year, potentially constraining the durability of the rebound. The steel industry may also be concerned that the US Supreme Court’s ruling on tariffs may trigger further protectionist measures given robust Chinese steel exports last year. Still, China is expected to face lower average duties on its metal-intensive exports following the court’s decision, potentially boosting exports. On the policy front, the People's Bank of China kept its benchmark lending rates unchanged for a ninth straight month, offering limited fresh stimulus to the domestic steel market.