A news item that popped up on the weekend said that Hongqiao would no longer be permitted to count their closed illegal pots as part of their winter heating season cuts. In other words, the story alleges that Hongqiao would still have to close another 30% of their capacity, having already closed almost that much for being illegal.
We cannot find any other reference to this story in the Chinese internet or media. We cannot find the source of this news item – it was cut and pasted without a byline. We think it’s probably a trader or someone who has a long position trying to talk the market up.
But it shows the jitteriness of the market right now. The story caused a shock among our followers.
We are just 2 months away from the onset of winter. Doubtless there will be more rumours fly around in the remaining weeks. We are keeping on top of them.
And while that’s happening, what is happening with demand?
We expect to see a bit of a spurt in metal demand from downstream factories next week. The first week of October is Golden Week in China, a week-long holiday to celebrate the creation of modern China in 1949. (Expect a huge celebration in 2 years’ time.)
That will be followed by forced closures of factories in and around the Beijing area, to keep the pollution levels down before and during the Communist Party’s 19th Congress.Then before we know it, it will be winter and factories in 5 provinces will be cutting capacity.
The next two weeks will be a peak production time for many factories, especially in the north. Pull through from those factories should keep the price buoyant through the rest of September.
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