China's steel prices have been falling since the beginning of August. A strong indication is that rebar futures, which fell the most this month, fell from RMB 5,700/ton (t) to less than RMB 5,400/ton, with spot rebar prices falling more than RMB 100/ton. The market is stagnant in August.
On August 17, the main rebar futures contract on the Shanghai Futures Exchange (SHFE) closed at RMB 5,345/ton, down RMB 45/ton, or 0.83%. In August, although spot rebar prices were relatively stable, they fell more than RMB 392/tonne, or 6.83%. According to the latest reports, on August 17'21, the average price of 25mm grade 3 rebar in major cities was RMB 5,258/ton, which is a slight decrease of RMB 6/ton. In August, the cumulative decrease was RMB 153/ton, or 2.83%.
This year, crude steel production cuts have become one of the key factors affecting the trend in steel prices. China's average daily crude steel production in July'21 reached a new low since April'20. As production restrictions began to show, steel prices continued to decline.
Thanks to production restrictions, crude steel production fell in July'21, but production is still higher than in the same period last year. Therefore, the current supply pressure in the market has not decreased significantly.
On the demand side, recent floods in many parts of China have caused repeated outbreaks, resulting in bottlenecks in transportation. Construction sites have been significantly affected and steel demand continues to be adversely affected.
The fixed asset investment rate weakened and the two-year average growth rate fell for the first time, according to data from the National Bureau of Statistics. Investments in both infrastructure and real estate have decreased significantly. The growth rate of industrial production also fell. The manufacturing PMI index and the new export order index fell. Current demand for steel is insufficient to regain growth momentum.
The current stock level in the factories is still on the rise.
Although retail stocks have fallen consecutively over the past two weeks, the decline has been relatively small and slow. On August 13,'21, data from Lange Steel showed retail stocks in 29 key cities were 13,285 million tons, a marginal decrease of 131,000 tons by 0.98 percent and a cumulative decrease of 320,000 tons, or 2.35 percent, in two weeks.
Frequent speculation on production cuts is causing volatility, but real demand remains sluggish and the scenario of weak supply and demand persists.
Market, policies, pandemic, weather, etc. affected by factors and demand remains low, making it difficult for the spot market to recover in the near term. In the short term, the steel market is expected to continue to fluctuate. However, the decrease in steel prices is expected to be relatively limited due to raw material costs.
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