The last two weeks of September saw a clear ebb in sentiment in Chinese steel markets as uncertainty over winter restrictions turned in to expectation that they would not be as strict as hoped for. How much production will actually be cut, and how this compares to last year and to demand in the coming months, will be key in determining the strength of the market in China, and therefore globally, in the coming months.

Market observers globally are looking at the topic of winter restrictions in China to understand the price developments for Q4 and Q1 2019. One major trader, for example, commented that the indications that Chinese output will continue to grow even during the winter period, together with the persistent weakness of the Turkish market indicates that corrections in the market across the border should be expected in the next months. If some major trade barriers during the same period is eliminated, then the correction could turn into a real crash.

In China winter output restrictions are certainly more widespread this year than a year ago. This year a total of 80 cities have been included and each one needs to publish a three-year action plan to fight emissions by the end of the year. Local authorities are being given more leeway in setting targets for themselves. While this does not necessarily mean local authorities will set less strict restrictions, it does give them some leeway to do so.