China just tightened the screws on steelmaking capacity, and futures immediately noticed. Rebar on the Shanghai exchange jumped after Beijing’s industry ministry floated a tougher “capacity swap” regime: new steel tonnage can only be built if at least 1.5x that amount is permanently scrapped (up from 1.25x under the 2021 rule).

The draft also reaffirms zero net additions in the most pollution-sensitive corridors of Beijing-Tianjin-Hebei, the Yangtze River Delta, and the Fenwei Plain, and nudges mills toward lower-carbon routes such as electric-arc furnaces (EAFs) and hydrogen pilots fed by scrap.

Oil just broke to five-month lows because two forces are pulling the market in the same direction: weaker demand signals and a fatter supply outlook. Traders are repricing growth as U.S.–China tensions metastasize from tariffs to port tolls, rare-earth controls and threatened software curbs, all of which gum up freight and confidence.

At the same time, the IEA’s latest balance points to a sizable surplus taking shape into 2026, enlarged by higher OPEC+ and non-OPEC output against a sluggish consumption backdrop. With Brent settling near $62 and WTI around $58, the tape is starting to entertain tail scenarios like sub-$50 Brent if policy frictions intensify while barrels keep coming.

China may be close to escaping deflation on paper, but the way it is happening is economically awkward rather than cleanly positive. The Iran war could push China’s producer prices back into positive territory after more than three years of deflation, largely because Brent had risen roughly 45% since late February and higher oil prices feed directly into factory costs. 

The background is that China’s deflation problem has been driven by weak household demand and excess industrial capacity, not by a shortage of supply. Inflation data showed February CPI rose 1.3% year on year, helped by holiday spending, while PPI was still down 0.9%, extending the producer-price deflation streak even as it narrowed.