Steel traded in a positive range in the month of July but lack of strong positive data failed to provide any significant move in the same. China kept on struggling with its inflationary problems and raised its interest rates for the third time in the year.
Despite its tight monetary policy, China's steel production remained high to match rising demand in the country. The country is currently focusing on urbanization of its states along with economic development and its investment plans seems to be bigger.
Government of China is directing its attention towards the construction of transport hubs, industrial premises and commercial high-rise buildings which may demand more steel in that belt in long term. Global steel production climbed in June, led by record crude steel output in China.
Global crude steel production rose 8 percent to 127.746 million tonnes year-on-year in June 2011, according to figures from the World Steel Association. Japanese economy is also helping maintain an upward swing as their crude steel output uplifted in June from May after carmakers boosted production following a post-quake hunch. Imports also increased by 12 percent from a year earlier, hinting towards an emerging demand but the yen's strength is stinging Japanese exports obscured the prospects for further improvement in steel output.
Domestic demand may remain subdued owing to monsoon season, rising interest rates and high fuel price, even though it is likely to outpace supply in the coming months ahead of festive season as various construction projects may resume by the end of monsoon season.
Steel prices traded higher last month and ended in the green for the fifth time in a row, and are still making higher top-higher bottom formation on the monthly charts. Though the metal continued to trade in positive territory, but failed to sustain on either side of its previous months’ trading range.
A close look at monthly chart shows the counter is trading in an upward moving channel where Rs. 29000/MT could prove as a very strong support.
The metal is also looking strong as it is sustaining above 61.8% retracement of a fall from Rs. 37500/MT to Rs. 17660/MT where any decline here should be treated as an opportunity of going long for medium to long term.
Any close above Rs. 31000/MT may pump air in the counter and let it perk higher towards Rs. 32000/MT in the coming months.
Courtesy: Religare Commodities
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