MNI: Expectations For China Stimulus To Underpin Steel Futures

China’s steel rebar futures are likely to be supported for the rest of the seasonal consumption peak period by expectations for additional pro-growth policies, fluctuating around or just below current levels but lacking upward momentum amid U.S. tariff disruptions, local analysts told MNI.

The October contract on the Shanghai Futures Exchange may stay around CNY3,130 per tonne, supported by resilient iron ore prices, and by speculation over easing including a reserve requirement ratio cut during the Politburo meeting in late April, said Guo Xinjie, an analyst at JLC Network Technology, a commodity service provider.

Guo saw any near-term fall below CNY3,000 as unlikely. But another analyst, who has lower expectations for additional stimulus soon, expects a near-term bottom of CNY2,900 for the October contract. Iron ore prices are unlikely to fall further below USD80 per tonne and an expected decline in steel demand has not yet materialised, the other analyst said.

Steel prices may face stronger downward pressure should the consumption peak usually seen in April be followed by oversupply in May and June, said the second analyst, adding that in that case output controls to rebalance supply and demand would be essential to offer some price support. (See MNI: China Stimulus To Support Steel Futures Until Peak Season)

The analyst said April’s stimulus is most likely to be limited to front-loading measures already announced, and aimed at boosting consumption and social welfare. (See MNI INTERVIEW: China To Boost Stimulus In U.S. Tariff Response)

“Authorities are more likely to save policy ammunition for the second half of the year, especially after a better-than-expected Q1 growth of 5.4% y/y,” the analyst said.

Any substantial support to steel demand would require increased funding for major infrastructure projects and an expansion of the consumer trade-in scheme to include more types of products especially in the home appliance and automobile sectors, said JLC Analyst Guo Yang. Greater efforts to promote rural revitalisation and fresh urbanisation could also release potential demand for steel, Guo added.

TARIFF IMPACT

Though Chinese steel exports are exempt from the latest U.S. reciprocal tariffs, these were still subject to a 25% rate effective on March 12. Vietnam and South Korea have also imposed temporary anti-dumping levies on some steel products from China.

Shipments to the U.S. only totalled 890,000 tonnes in 2024, 0.8% of China’s overall steel exports, though indirect sales to America through steel-related products, mainly home appliances, auto parts and mechanical products, were over 10 million tonnes, out of total indirect exports of 140 million tonnes, said JLC Analyst Zhu Shanshan.

The U.S. tariff hike may lead to a 3-5% decline in China’s overall steel exports, said Zhu, given the possibility that it could trigger protectionist measures by other countries, further limiting intermediary trade. Indirect exports could see a reduction of at least 20 million tonnes, she added.

In the near-term, exporters can still find opportunities for diversifying destinations, after President Donald Trump reduced reciprocal tariff rates on imports from most U.S. trade partners to 10% for 90 days, despite raising tariffs on China to 125%, said one of the analysts.

Steel exporters are actively adjusting their product structure, the analyst added, noting a 6.6-times year-on-year surge in exports of steel billet, which faced lower trade barrier, in the first two months of 2025.