In two weeks, the cost of steel products rose by more than 1,600 yuan (US$250) per ton.
It has attracted the attention of the highest levels of the Chinese government. Chinese Premier Li Keqiang said that the government’s high-frequency response peaked on Monday. He said that it is necessary to avoid passing commodity price increases to consumers. Steel prices then plummeted, falling back to their pre-May 1 levels.
Tangshan, North China’s city, is producing the most considerable amount of steel in the world. By 2020, the city had made approximately 14% of total China’s raw steel.
After the Shanghai Futures Exchange vowed to study “abnormal trading,” iron ore prices plummeted on Wednesday.
The price of iron ore on the Dalian Commodity Exchange fell 6.1%, slightly higher than the lowest price of 992 yuan (US$155.20). It was the lowest price since April 12.
The Shanghai construction rebar contract closed down 6% to 4,667 yuan ($729.79) per ton, earlier hitting its lowest level of 4,661 yuan since March 24.
When the deal started, the market was already under pressure from concerns about heavy rains in southern China and hot temperatures in the north. These conditions slowed down construction activities, which may curb demand for rebar and iron ore.
The Momentum of China’s Solid Economic Development Eased in May
As raw material prices squeeze profits, companies have become more cautious, and real estate and auto sales have performed poorly.
The index has fallen since April but is still expanding due to strong export demand.
A survey of more than 500 companies showed that the confidence of small and medium-sized enterprises in May fell. They from the highest level since the outbreak of covid-19 last month. The index that measures current performance has weakened this month. The decline in the “expectation” sub-index indicates concerns about future demand and profit margins.
The soaring price of raw materials has become a significant challenge for SMEs as well.
Domestic-focused SMEs seem to be more susceptible to rising input costs. Besides, export-oriented SMEs’ profit margins have remained unchanged due to firm new orders and higher output prices.