Chinese steel futures prices continued their downwards correction on Wednesday amid high trading volumes. The domestic physical market meanwhile remains quiet, leaving futures prey to fluctuations in sentiment, Kallanish notes.

On the Shanghai Futures Exchange the May rebar contract closed at CNY 3,702/tonne ($546/t), CNY 83/t lower than Tuesday, while the same contract for hot rolled coil closed down CNY 66/t at CNY 3,608/t.

Steel futures have now been declining sharply for two straight days, as have iron ore futures in Dalian. Trading volumes meanwhile have spiked as the sharp price movements have triggered more day trading.

With physical domestic steel demand still weak however, sentiment is still playing an outsized role in futures markets. Considering that trade negotiations will be ramped up on Thursday and Friday, including a reported informal meeting between Xi Jinping and Robert Lighthizer, the trade war is likely to be another complication for sentiment. The release of trade and PPI data will no doubt also make some headlines. Markets are set to stay messy until fundamentals begin to pick up.