Chinese rebar prices continued their downward trend in the past week. However, market confidence has shown signs of recovery, driven by steel mills' recent production cuts.

In Shanghai on Friday afternoon, 20mm HRB400 rebar was trading at CNY 3,100-3,130/tonne ($430-434/t), down CNY 20/t on-week, Kallanish assesses. The October 2024 rebar contract on the Shanghai Futures Exchange closed at CNY 3,379/t on the same day, up by CNY 24/t compared with Thursday and CNY 8/t higher from a week before.

With the new rebar standard set to take effect at the end of September, and the inventory of old-standard rebar far exceeding current demand, traders have rapidly reduced selling prices to clear inventory. This has driven a sharp decline in rebar prices over the past three weeks. 

Chinese rebar prices have now fallen below billet prices. On Friday, Tangshan domestic billet held at CNY 3,130/t.

However, the pace of rebar price declines slowed during the week as market sentiment improved. This rebound in confidence follows announcements from several Chinese steel mills regarding production cuts. According to incomplete statistics, dozens of Chinese steel mills revealed plans in July and August to reduce production of construction steel, potentially cutting market supply by over 3 million tonnes of construction longs.

The combination of accelerated destocking and production cuts is expected to alleviate supply pressure amid the implementation of the new standard, fostering expectations of a subsequent price rebound.

Three major construction steel producers in eastern China, Shagang, Zenith, and Yonggang, announced reductions in their ex-mill prices each of CNY 100-150/t in early August (see table below). Additionally, they will provide subsidies of CNY 170-240/t to agents to offset losses incurred at the end of July. The mills expect the construction steel market will continue to face downward pressure in the short term.

Chinese construction steel ex-works prices (including VAT), 1-10 August 2024

  Rebar HRB400
16-25mm (CNY/tonne)		 High-speed wire rod
6.5mm (CNY/t)		 Rebar in coil
8-10mm (CNY/t)
Shagang offer 3,620 N/A * (latest price 4,110) 3,660
Shagang change -150 N/A * -150
Zenith offer 3,350 3,700 3,700
Zenith change -100 -100 -100
Yonggang offer 3,400 3,660 3,660
Yonggang change -100 -150 -150

Source: company information
Changes are versus the previous ten-day period
* Shagang has temporarily suspended issuing prices for wire rod