Chinese steel futures prices gained on Thursday on the back of easing housing market restrictions and low inventories. A lack of clarity in nationwide economic policy remains of concern however, Kallanish notes.

On the Shanghai Futures Exchange the May 2019 rebar contract closed at CNY 3,481/tonne ($505/t), CNY 56/t higher than Wednesday, while the same contract for hot rolled coil closed CNY 11/t higher at CNY 3,459/t.

Steel markets were buoyed by news that two cities have eased restrictions on housing markets. This prompted speculation that further easing would be announced in other cities, easing some of the pressure on the sector which is expected to be the biggest drag on steel demand in 2019. The move has also been interpreted however as a natural progression from China’s more decentralised approach to setting policy targets. Local governments have had greater leeway on setting some policies for a while, such as the winter restriction policy.

The lack of major economic policy announcements from central government this week however suggests an easing of regulation and tax burdens will be the focus on policy rather than large-scale spending. How markets develop into the new year is still very much uncertain.

Inventory data also continued to suggest that oversupply of steel is not as bad as feared. Although stockist rebar inventories were up 1.2% this week to 3.01 million tonnes, according to a count by SMM, overall rebar inventories were down -1.4% at 4.86mt thanks to a drop in mill inventory.

For hot rolled coil meanwhile, overall inventories were down -1.5% this week to 2.8mt. Of this, mill inventories were up 1.7% to 908,500t, while those at stockists were down -2.9% to 1.89mt.