Steel Holds Decline on Shrinking Margins

Steel rebar futures in China held their recent decline to around CNY 3,100 per ton in early September, as rising raw material costs deepened losses at steel mills, overshadowing stronger steel exports. Industry data showed that the average cost of hot metal and steel billets at major mills in Tangshan rose sharply this week, pushing average losses to more than CNY 100 per ton. China’s non-manufacturing PMI, which covers services and construction, also held steady at 49.0, matching July’s reading and remaining at its weakest level since December 2022. Meanwhile, China’s total steel exports rose 7.8% week-on-week to 2.55 million tons in the week to August 31, marking a third consecutive weekly increase and the highest level in nearly eight weeks. In August, steel prices rallied sharply as investors anticipated a recovery in demand due to seasonal factors ahead of the September peak construction season.

Steel rebar futures fell to around CNY 3,100 per ton in early September, pulling back from multi-month highs as surging oil prices heightened inflationary risks and reinforced expectations of imminent interest rate hikes, weighing on the demand outlook. Higher rates could eventually slow global economic growth, dampening demand for industrial metals. Meanwhile, steel prices rallied sharply in August as investors anticipated a recovery in demand due to seasonal factors ahead of the September peak construction season. China’s National Development and Reform Commission also reportedly held meetings in recent weeks, urging local governments to accelerate the construction of major projects. However, China’s non-manufacturing PMI, which covers services and construction, held steady at 49.0, matching July’s reading and remaining at its weakest level since December 2022.

Steel rebar futures jumped above CNY 3,130 per ton, reaching their highest levels since mid-June as investors anticipated a recovery in demand due to seasonal factors ahead of the September peak construction season. Construction activity in top consumer China typically picks up ahead of winter, strengthening the outlook for demand for steel and raw materials. China’s National Development and Reform Commission also reportedly held meetings in recent weeks urging local governments to accelerate the construction of major projects. Meanwhile, China’s non-manufacturing PMI, which covers services and construction, held steady at 49.0, matching July’s reading and remaining at its weakest level since December 2022. Sweeping regulatory changes for China’s crisis-hit property sector announced last week also drove shares in smaller developers sharply lower, amid expectations of further consolidation across the industry.