Chinese longs prices supported by output restrictions in Tangshan, demand

During the week ending October 12, average prices of Chinese domestic rebar and wire rod have moved up amid rising rebar futures prices, production restrictions in Tangshan and stock replenishments following the long holiday.  

The average rebar price has increased by RMB 80/mt over the past two weeks, while it has added RMB 34/mt since last Friday. Wire rod prices have gained RMB 63/mt compared to pre-holiday levels. Transaction activities have improved as market players have built up stocks following the long holiday, resulting in declines in inventory levels.

Meanwhile, Tangshan has issued a production restriction policy for the autumn-winter season 2020-2021, which has bolstered market sentiment and exerted a positive impact on rebar and wire rod prices. According to the reports, in the period from October 1, 2020 to March 31, 2021, most mills in Tangshan will have to cut operation rates of blast furnaces by 10-45 percent depending on the category of the producer. Two steelmakers are in the category “A” and will not be restricted at all as they have already achieved emission targets. The majority of mills will have to cut operations by 10-20 percent, according to sources. Sintering capacities will be restricted by the same amount as blast furnaces. Though they are slightly looser than last year, after the high production figures in August-September these restrictions will have an impact on the market and support prices and sentiments.

Export prices for rebar and wire rod from China have also moved up, reflecting the better domestic steel market situation. Offer prices for rebar from Chinese mills have added $7.5/mt on average from last week to $470-495/mt FOB. Wire rod prices have risen to $510-520/mt FOB, also up by $7.5/mt.

On October 12, rebar futures contract (2101) offers closed at RMB 3,637/mt ($533/mt) at Shanghai Futures Exchange, up RMB 77mt ($11.5/mt) or by 2.2 percent since September 30 and up by 0.69 percent compared to the previous trading day, signaling market players’ bullish sentiments as regards the future market prospects.

It is thought that spot rebar and wire rod prices in the Chinese domestic market will edge up slightly in the coming week.

Average domestic rebar and wire rod prices in China's main markets are presented in the tables below.  

Rebar prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

Wire rod prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

$1 = RMB 6.7126