Prices of a key Chinese steel product used in construction were at their lowest since 2017 as the world’s biggest market for the metal grappled with a massive glut.
Reinforcement bar — or rebar for short — is a benchmark for China’s traditional steel markets because it’s used to strengthen concrete in buildings and infrastructure. The eight-year low in Shanghai highlights the demand struggle facing steelmakers due to a prolonged downturn in the country’s property sector.
The China Iron and Steel Association reiterated at a conference this week that controlling capacity expansion is a focus and had earlier said that Beijing is “actively deploying and promoting” a crude steel production mandate. Rebar prices have dropped 11% so far this year, while iron ore is down about 6%.
The bigger drop in prices of domestic steel compared with raw materials suggested that “consolidation and rationalization in China are needed to boost prices”, analysts at Bloomberg Intelligence wrote in a note. For iron ore, prices might ease toward $90 a ton by October on seasonal softness and rising supply, “though cost support and policy easing could limit downside.”
The ongoing annual Singapore International Ferrous Week is marked by a guarded outlook. Eric Bretting, head of ferrous trading at Macquarie Group, said that despite expectations of China rolling out more stimulus to counteract tariff pressures, it’s unlikely such measures will come.
Rebar contracts in Shanghai traded at around 2,955 yuan as of 11:43 a.m. local time. Iron ore futures in Singapore dropped for a fifth day to $96 a ton.
There’s also some “nervousness” around iron ore supply from non-traditional regions next year, according to Joel Parsons, portfolio manager at Drakewood Capital Management. “Even if you exclude geopolitical risk, there is risk technically,” in terms of supply coming online later or slower than previously anticipated, he said.
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