Local Chinese longs prices tumble as demand outlook weak, supply may not fall

During the week ending August 2, average Chinese domestic rebar and wire rod prices have moved down amid decreasing rebar futures prices and the worsening Covid-19 pandemic situation. At the same time, concerns about sharp steel production cuts in the second half of the year have emerged after Beijing’s announcement of the easing of aggressive measures to reduce carbon emissions.  

During the given period, the average rebar price has declined by RMB 60/mt, while the average wire rod price has lost RMB 67/mt.

The greatest decline has been seen today, August 2. The average rebar price has dropped by RMB 97/mt or $15/mt since last Friday. This happened after the sharp fall in futures prices on Monday after the government’s meeting on Friday.

On July 30, the Communist Party’s Politburo called for a coordinated and phased process of reaching carbon neutrality, avoiding “campaign-style” carbon reduction efforts, as reported by the official Xinhua News Agency. President Xi Jinping stated that the main aim is stability in terms of economic growth and bulk commodities prices as well. Big goals in the short term (which may include the previously discussed target of the government to keep crude steel production in 2021 at the level of 2020) are not expected to be a priority any more. As a result, market participants have said that the expected steel production cuts will be canceled and that rebar supply will remain firm.

Rebar futures have lost almost six percent or RMB 318/mt ($49/mt) on August 2 compared to the previous trading day on July 30.

On August 2, rebar futures contract (2105) offers closed at RMB 5,414/mt ($837/mt) at Shanghai Futures Exchange, down RMB 273/mt ($42.2/mt) or by 4.8 percent compared to July 26, signaling market players’ bearish sentiments as regards the future prospects for the rebar market.

During the given week, local rebar and wire rod prices have also been under pressure from the expectations of slack demand in August. At the same time, the Covid-19 pandemic situation in China has been worsening, as new cases have been registered in eight large Chinese cities, which will exert a negative impact on the rebar and wire rod markets. It is thought that rebar and wire rod prices in the Chinese domestic market may edge down slightly further 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 6.466