Steel Holds Decline Despite Strong China Exports

Steel rebar futures remained below CNY 3,140 per ton, hovering near six-week lows even after data showed China’s steel exports rose 8.8% in May from the previous month, supported by weak domestic demand and improved margins for overseas shipments. China exported 10.34 million metric tons of steel used in construction and manufacturing, the highest level since December. However, cumulative steel exports for the first five months of the year were down 8.1% from a year earlier amid growing trade protectionism from key overseas markets. Meanwhile, China’s steel market has entered its seasonally weak demand period earlier than usual this year due to persistent rainfall and the early arrival of summer heat. Construction activity typically slows during periods of heavy rain and high temperatures, weighing on demand for steel products.

Steel rebar futures fell toward CNY 3,140 per ton, hitting six-week lows as China’s steel market entered its seasonally weak demand period earlier than usual this year due to persistent rainfall and the early arrival of summer heat. Construction activity typically slows during periods of heavy rain and high temperatures, reducing demand for steel products. Chinese steelmakers have also come under pressure from tighter profit margins, limiting their willingness to accumulate raw material inventories or ramp up production. Margins have been further squeezed by rising coal prices following the recent mine accident in China’s Shanxi Province. Meanwhile, recent industry data showed domestic crude steel production fell 2.8% year-on-year to 83.6 million tons in April, marking the lowest April output level since 2018.

Steel rebar futures were at CNY 3,190 per tonne in June, their highest in two weeks to sustain an over 3% increase since the start of the year as aggressive stimulus measures by the Chinese government supported expectations on demand. Major ratings houses noted they expect home prices in China to halt their decline by next year, reflecting the bottom of a major source of rebar consumption globally. The signals are consistent with measures taken by local governments to boost property buying, with the Shenzhen area easing restrictions on home buying and Guangzhou increasing subsidies. Infrastructure spending is also due to support ferrous metal buying, including Beijing's push to set up industrial and commercial hubs in Western China. On the supply front, domestic steel output eased by 2.8% annually to 83.6 million tons, the lowest amount for the month since 2018.