China's rebar prices fall to multi-year lows

MySteel Global: Chinese rebar prices have been steadily declining lately to hit multi-year lows in both the spot and futures markets, Mysteel Global notes. The sharp falls in prices are attributed to bearish market sentiment resulting from the lackluster demand for bars during the summer lull, sources remarked.

As of August 13, China's national HRB400E 20mm dia rebar price, a key indicator of domestic steel-market sentiment, had declined for six straight working days by a total of Yuan 124/tonne ($17.3/t) to reach Yuan 3,270/t and including the 13% VAT. This marked the lowest level since early December 2016, according to Mysteel's assessment.

In the derivatives market, rebar futures prices have also been steadily softening, with the most-traded rebar contract on the Shanghai Futures Exchange (SHFE) for October delivery declining for a seventh trading day on August 14, slumping another Yuan 102/t from the prior day's settlement price to close the daytime trading session at Yuan 3,099/t.

Indeed, at one point during the trading session, the most-traded rebar contract had tumbled to Yuan 3,056/t, the lowest since 2017, according to the exchange's data.

"The macroeconomic statistics appear relatively weak, suggesting domestic demand is unlikely to recover substantially," said a Shanghai-based analyst. He cited the latest data from the People's Bank of China, which showed that the country's banks extended just Yuan 260 billion in new RMB loans during July, Yuan 85.9 billion less compared with the same period last year.

Meanwhile, "poor long-steel consumption among building contractors, together with the market transition to new rebar standards, have disturbed sentiment in the domestic steel market," another market source said.

Mysteel's survey of spot sales among the 237 Chinese trading houses it tracks nationwide showed that their trading volume of long steel comprising rebar, wire rod and bar-in-coil has averaged just 105,236 tonnes/day so far this month, 15.7% lower on month or down 22.4% on year.

Moreover, "domestic steel mills have been suffering deepening margin losses on steel sales, leading them to rein in production," the source added, noting that the production reduction is hammering prices of steelmaking raw materials, further diminishing support for domestic steel prices.

On Wednesday, the SHFE's most-traded hot-rolled coil contract for October delivery also closed the daytime trading session lower at Yuan 3,246/t, dwindling by some Yuan 111/t from the previous day's settlement price, the data showed.

Note: This article has been written in accordance with an article exchange agreement between MySteel Global and BigMint.