Stainless steel prices stable, increases expected from Taiwan
Stainless steel prices stable, increases expected from Taiwan

17 July – Stainless steel prices have stabilised further and Taiwanese market participants expect price increases for August, which are positively supported by a decline in production and the rebound in nickel, among other factors. From China, there are first reports of energy rationing in at least one steel province. There are already signs of further measures and a significant reduction in steel production. Copper and aluminium could benefit from bullish sentiment in the markets.

Stainless steel prices stable, increases expected from Taiwan 

The Taiwanese stainless steel market expects that the major producers will probably increase their prices for August. The background to this assessment is the increased nickel prices. In addition, the stainless steel mills expect prices to be further supported by the Chinese stimulus programmes and improved market sentiment, but also by reduced stainless steel availability.

Energy rationing in Chinese steel province  

There are also increasing reports of energy rationing in China, e.g. in Sichuan province. There are indications that the impact on the steel industry could be as severe as in previous years. Steel mills in Sichuan province have already been ordered by the government to reduce or completely shut down production until at least August. 

Positive outlook for Hong Kong stock market driven by tech stocks 

Last week, the Hang Seng Index, which is heavily influenced by the technology sector, experienced a significant boost, gaining 5.8 percent. Although it has seen a decrease of 4.3 percent in euro terms since the beginning of the year, there are several positive factors contributing to the market’s sentiment.

Contributing factor: US bond yields 

One contributing factor is the decline in US bond yields, which has created a favourable environment for growth stocks. This, in turn, has bolstered investor confidence in the tech sector. Additionally, China’s Premier Li Qiang’s recognition of the importance of platform companies as drivers of innovation during a meeting with industry leaders has further boosted optimism.

China with a fairer and more competitive market? 

Furthermore, Premier Li has called for the establishment of a fair and competitive market environment, as well as improved access to investment at all levels of government. These measures are expected to provide a positive impact on the tech industry and enhance its growth potential.

There is also hope that the resolution of the regulatory investigations against two major tech corporations could signal a temporary end to increased government regulation in the industry. This development has been welcomed by investors, as it may alleviate concerns and allow for smoother operations.

Industry consultations viewed positively 

Additionally, the recent resumption of consultations between top US government officials and industry leaders has been viewed positively by market participants. This renewed dialogue offers the potential for improved cooperation and trade relations, which could further benefit the Hong Kong stock market.

Potential for further growth in the coming months  

Looking ahead, analysts expect the Hang Seng Index to continue its upward trajectory, with a projected price-earnings ratio of 8.8 for the next twelve months. This figure is almost 20 percent below the ten-year average, indicating the potential for further growth in the coming months.

Bullish macro sentiment supporting aluminium and copper 

The SHFE2308 aluminium contract closed at 18265 yuan/mt on Friday, while LME aluminium closed at $2273.5/mt. Last week, base metals generally rallied as the US dollar weakened on weaker-than-expected US CPI data and market expectations of a Fed rate hike declined. China’s stimulus measures and massive capacity restarts in Yunnan, as well as production cuts in Sichuan, have the market optimistic. Aluminium smelter costs have risen due to the increase in alumina prices. A recovery in the most traded SHFE aluminium contract and LME aluminium is expected this week. 

Copper demand rising 

According to a latest survey from Asia, domestic bonded zone copper inventories showed some changes. Shanghai bonded zone stocks fell by 1,900 tonnes, while Guangdong bonded zone stocks remained stable. Import losses against the SHFE front-month copper contract exceeded last Friday’s.  

Goldman Sachs predicts that the increasing use of electric vehicles (EVs) is a key driver of the bullish copper price. Copper demand from the EV industry is expected to reach 1 million tonnes this year, rising to 1.5 million tonnes by 2025. Copper’s high electrical conductivity and ductility make it ideal for power conversion and transmission in EVs. Electric vehicle production accounted for around two-thirds of the global increase in copper demand last year and could account for around 27% of new copper consumption over the next decade. 

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