Steel Firms Up as China as China Tackles Overcapacity

Steel rebar futures fell to around CNY 3,000 per ton in early August, reaching their lowest level since June 2025 as widening losses at Chinese steel mills and a deteriorating industry outlook continued to weigh on sentiment. Industry data showed that average losses at steel mills in Tangshan have surpassed CNY 100 per ton and are expected to keep widening, with the sector likely to remain under pressure next month. China’s prolonged property downturn also continued to curb steel demand, as construction accounts for roughly one-third of the country’s steel consumption and represents the bulk of rebar usage. Meanwhile, investors digested updates from the Politburo meeting in Beijing, where policymakers refrained from introducing major new stimulus measures and instead focused on implementing existing fiscal policies to support the slowing economy. Elsewhere, private data showed China's manufacturing activity slowed to a four-month low in July, further weighing on the demand outlook.

Steel rebar futures in China were close to CNY 3,060 per tonne, holding the pullback from one-month high of CNY 3,130 on July 16th amid low demand in China. The oversupply of housing that caused their prolonged property crisis limited investment for new construction. New home prices contracted further in June, and construction starts by floor area fell 23.4% annually in the first half of the year. Construction accounts for one-third of Chinese steel demand, making up for most of rebar purchases. Manufacturing growth was also muted as low consumer demand was combined with protectionist policies limiting the magnitude of foreign orders for goods producers, especially due to the softening momentum for auto production growth. Consequently, domestic steel output totaled 500 million tonnes in the first half of the year, around 3% below levels from 2025. Still, ample infrastructure expenditure from Beijing, including for power plants, grids, and electricity storage, supported consumption.

Steel rebar futures hovered around CNY 3,090 per ton, recovering after recent losses as higher iron ore prices and improving sentiment toward China's steel sector supported the market. Confidence was underpinned by resilient crude steel production, which averaged 2.79 million tons per day in June, the highest since March, while strong iron ore imports and expectations of additional policy stimulus from Beijing also buoyed sentiment. However, gains remained capped by persistent weakness in China's property sector, with first-half real estate investment falling 18% year-on-year and construction starts declining 23.4%. Persistent high temperatures and frequent rainfall across parts of China also continued to disrupt outdoor construction activity, keeping demand for construction steel subdued.