Metals: Copper -0.9% to $4.27lb, Iron ore 0.0% to US$217.85/t,...

Metals: Copper -0.9% to $4.27lb, Iron ore 0.0% to US$217.85/t,
Energy: Brent crude -2.5% to US$74.6/bbl, WTI -2.8% to US$73.1/bbl
Key overnight stock moves: BHP LND +0.1%, Rio Tinto LND +0.2%, S32 (LDN) -1.1%, AAL +1.4%, GLEN +1.8%, Vale +1.2%, AA -1.3%, Shell -0.3%, BP -0.4%, XOM -2.2%, Chevron -1.9%, COP -3.0%
Global Indices: S&P 500 +0.12%, DOW +0.13% & FTSE -0.47%

China makes move on wider steel output cuts, but industry wary of supply shortages. Since early July, China has started widening its efforts to cut steel output across the country, as it aims to keep production in 2021 below that of 2020 -- part of its overall plans to curb carbon emissions. However, it remains to be seen how strictly these output cuts will be implemented through 2021, as curbs will lead to steel supply shortages and skyrocketing prices in the second half of the year, a situation China has been trying to control via several measures in recent months. So far, major mills in 11 provinces, as well as in Shanghai and Chongqing, have received verbal orders to keep their crude steel production within 2020 levels, market sources said. Other provinces are expected to follow suit. Mills, whose crude steel output in H1 exceeded year-ago levels, must cut their H2 production to ensure their annual output does not breach 2020 levels. As a result, China’s crude steel production will have to decline by at least 58 million mt, or 10%, on the year, to 508 million mt over July-December, in a bid to ensure that this year’s annual output is on par with 2020, S&P Global Platts calculations based on National Bureau of Statistics data showed. (Platts).

China’s crude steel output was expected to rebound in early July, after a decline in late June, as iron and steel output cuts in northern China begin to ease in the wake of Chinese Communist Party centenary events held on July 1, market sources said July 7. The rise in production is likely to weigh on steel prices amid low seasonal demand in July. However, the downside is expected to be limited, as market chatter suggests the government is still likely to implement nationwide iron and steel output cuts later in 2021 in to bid to reduce pollution. China’s daily pig iron and crude steel output averaged 2.449 million mt/day and 3.127million mt/day, respectively, over June 21-30, both down 4% from mid-June, according to the China Iron and Steel Association, or CISA, Pig iron output was also down 3% year on year, while crude steel output was up 5% over the same period. (Platts).

Iron ore futures declined ahead of data on China’s economy and steel output this week, which will offer investors clues on demand strength. China is due to publish its second-quarter gross domestic product report on Thursday, which will provide clarity on whether it will shift from its gradual monetary and fiscal tightening. Premier Li Keqiang sounded a cautious note this week, warning that the nation needs to prepare for cyclical risks and make counter-cyclical adjustments. He also said China will take comprehensive measures to ease pressure from rising commodity prices. (Bloomberg)

Commodities investors have a lot of seemingcontradictions to sift though when it comes toChina’s policy response to slowing growth and stubbornly high prices and whatit means for the trajectory of markets. The second-quarter GDP print and accompanying figures on Thursday are likely to help crystalize views on the degree to which Beijing has about-turned and is now pursuing easier money. Resilient trade figures for June probably mean that the data dump, which also includes industrial production and retail sales, won’t deliver the kind of shock that was implied by last week’s cut in the amount of cash banks are required to hold in reserve. And while the central bank says it expects producer prices to ease in the fourth quarter, Premier Li Keqiang has nevertheless returned to the theme of commodities inflation. In comments to state radio, he pledged to take comprehensive steps to ease pressure from rising prices, suggesting that Beijing isn’t done with its campaign to rein in raw materials costs. How China’s policy stance is playing out in ferrous markets will be one focus of Thursday’s output figures. Beijing’s plan to cut steel production and control emissions can only boost prices of the alloy while ultimately curtailing demand for its chief feedstock, iron ore. (Bloomberg)