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CSI: Slower H2 won’t stop tight steel markets (Aug. 6, 2021)

China’s policy environment continues to fluctuate dramatically, while sentiment swings have begun to boost steel price volatility, and have finally knocked iron ore off its $200 perch. Expectations for the full year remain broadly on track, with the strong growth rates in output and demand in H1 turning negative in H2.

In this issue we look at the balance of the market for the full year, and how it will tighten Chinese steel markets in the coming months.

The first half of the year has seen strong year-on-year growth in Chinese steel output and demand, but this is as much due to the weak basis for comparison as to the speed of its economic recovery. China’s leaders seem to be increasingly concerned about the economy in the second half of the year. The country is struggling to boost consumer demand, facing imported inflation from higher commodity prices, and now is facing further disruptions due to a new outbreak of Covid. Amidst all of this, China is aiming to push through headline policies such as managing debt levels, reducing carbon emissions and economic restructuring. As ever it is a difficult balance that China is trying to maintain.