China tries to calm steel prices

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Steel is useful: it’s a predominant material in construction and other industries. This makes it a barometer for economic growth.

And it’s continued to grow in value.

You can blame China.

One of Japan’s biggest producers, Tokyo Steel, cited increased costs and Chinese demand as it announced price increases.

China is one of the biggest producers and users of the alloy.

Its meteoric price rise has been attributed to a stimulus package introduced to give the economy a lift before the Communist Party meets for their 5 yearly Congress.

But China is worried.

They don’t want a bubble to form, where there’s a quick rise followed by a sudden price collapse. This would hinder the country’s already slowing growth rate.

They’re also worried that recent price hikes aren’t down to supply/demand but buyers fearing that production will fall because the government is seeking to reduce the sector’s overcapacity and diversify away from heavy industry. Tough new pollution regulations coming in will also put pressure on producers to lower output.

And then there’s geopolitics.

China has long been accused by Europe and the US of dumping steel on the global markets, pushing the price down. With a US president already suspicious of free trade and China’s impact on the American economy, authorities have plenty of reasons to try and stabilise the market should there be a price collapse.

First steps

One of the biggest markets is increasing processing fees and placing limits on the amount that can be purchased.

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