Shanghai Steel Futures Fall on Trump's Tariff Threat

Chinese steel futures fell on Monday, the first trading day after a four-day national holiday, amid concerns over trading prospects after US President Donald Trump said he would raise US tariffs on Chinese goods worth $ 200 billion.

This came as the two countries worked to reach an agreement to end a months-long trade war following rounds of negotiations between their senior officials.

Media reported that China is considering canceling trade talks with the US this week following Trump's threat.

Underlying construction rebar futures on the Shanghai Futures Exchange fell 1.4 percent to 3,756 yuan ($ 554.06) a tonne.

Hot rolled coil prices fell 1.6 percent to 3,714 yuan a tonne.

However, tightening environmental measures in the main steel city of Tangshan raised supply concerns, providing some support to prices.

The Tangshan government last week ordered steel mills in seven districts to halve sinter and shaft furnaces in May to improve air quality.

“We estimate that about 29.2 percent of blast furnaces in Tangshan will be closed in the second quarter, which will help slow the growth in steel production,” analysts at Jinrui Futures said.

In April, steel mills in Tangshan, on average, were imposed about 20% of production restrictions.

Increased production restrictions are expected to lead to higher margins at steel mills, and raw material prices are expected to rise, analysts said.

Steel material prices rose, and the most active iron ore contract on the Dalian Commodity Exchange rose 0.6 percent to 638 yuan a tonne.

Coking coal prices rose 0.8 percent to 1,362.5 yuan a tonne, while coke prices rose 1.2 percent to 2,063 yuan.