• Steel prices have comfortably established below $100.00 amid trimmed demand forecasts.
• Resurgence in China’s Covid-19 situation may worsen demand for steel.
• Downbeat Caixin Manufacturing PMI has dented the market sentiment.

Steel prices are continuously auctioning below $100.00 for the past three weeks as market veterans are trimming steel demand forecast due to the lack of construction activities in China. As individuals are dodging mortgages to the banking sector, critical for real estate and construction activities, steel demand is fading dramatically.

Steel mill owners are banking on production cuts as steel stockpiles are accelerating faster due to weak demand in China. Major Angang Steel Co., near Beijing, cited that “it sees tough conditions persisting through the end of the year”.

The Chinese authorities are aware of the fact that the overall demand is dropping vigorously, which forced the People's Bank of China (PBOC) to adopt a ‘dovish’ stance on the Prime Lending Rate (PLR). It is worth noting that the PBOC trimmed its one-year PLR and five-year PLR by five and 15 basis points (bps) respectively. Also, economic stimulus is around the corner to spurt economic activities and eventually the growth rate.

Meanwhile, a resurgence in Covid-19 in China has refreshed fears of recession ahead. Major provinces of China have announced lockdown curbs to contain the Covid-19 spread. This may further result in a decline in overall economic activities.

Besides that, China’s Caixin Manufacturing PMI has trimmed to 49.5 against the consensus of 50.2 and the prior release of 50.4. This has soared signs of de-growth in China and it would be worthy of dictating that the steel demand would have also declined in August.