Steel Declines from 2-Week High

Steel rebar futures fell to CNY 3,100 per tonne from the two-week high of CNY 3,130 on September 16th amid lower iron ore prices and downside risks on demand. The property crisis in top steel consumer China continued to prevent significant demand growth for rebar. Housing prices fell 3% annually in August as existing home sales took the majority of home sales in the country on a year-to-date basis, reflecting the government's effort to cap the oversupply of residential properties. The developments limit steel buying from major developers in the country, among the main buyers of rebar in the world. Consistently, the official construction PMI in China feel to a record low of 46.9. Elsewhere, a group of trade finance firms accused trader Radiant World of fraudulent invoices to back receivables, driving ore prices to fall sharply as trade finance liquidity dried.

Steel rebar futures held above CNY 3,100 per ton, hovering near multi-month highs as several Chinese steelmakers pledged to curb production and reduce steel inventories amid sharply declining margins. The state-backed China Iron and Steel Association, together with 45 major steelmakers including China Baowu Steel Group, urged domestic producers across the industry to firmly implement output controls to bring down elevated inventory levels. Profitability at Chinese steelmakers deteriorated sharply, pressured by high production costs and weak steel demand. As a result, some producers have reduced operations and scheduled maintenance. Recent data also showed that China’s new home prices continued to fall in August, underscoring the persistent drag from the country’s prolonged property downturn.

Steel rebar futures rose above CNY 3,130 per ton, hitting two-week high even as weak market fundamentals continued to weigh on the broader market. Elevated coke prices continued to squeeze steelmakers’ profit margins, prompting some producers to scale back operations and undergo maintenance. Industry data showed that steel mill profitability in China fell sharply to 7.79% in the latest week. Chinese steel demand also weakened further in the third quarter amid a continued slowdown in construction activity. Data showed that China’s new home prices extended their declines in August, highlighting the persistent drag from the country’s prolonged property downturn. Meanwhile, China’s leading industry association reportedly urged steelmakers last month to voluntarily reduce output, aiming to lower inventories and restore profitability following a challenging first half.