Rebar up to 3700 yuan

After nearly two months of consolidation, the Shanghai Rebar main contract finally broke through the 3,700 yuan per ton mark. Industry sources suggest that since December, the rebar market has been driven by expectations of economic stimulus and policy support. Optimistic data on the central economic plan and urbanization projects have boosted investor confidence, but underlying fundamentals remain weak, with oversupply still pressing on prices. As a result, a true "reversal" in the market is still far from being confirmed. Despite entering the off-season, the rebar market has shown unusual strength. Since November 30th, the 1305 main contract of rebar was only down on one out of seven working days, with a daily price fluctuation of around 6%, ending a month-long period of sideways trading. This suggests some renewed interest in the sector, even during a typically slow time. Zhou Ting, a senior analyst at Jin Rui Steel, noted that macroeconomic factors continue to provide some momentum to the steel market. However, the ongoing restructuring of the real estate sector and policy adjustments may lead to a moderate increase in demand. The imbalance between supply and demand remains a key challenge, and downward pressure on steel prices is expected to persist. Interestingly, this year's market behavior differs from previous years. While traders used to stockpile large amounts of steel before the off-season, current market conditions—marked by tight capital and a bearish outlook—have dampened their enthusiasm. This contrast highlights the more cautious approach taken by market participants this time. Despite the weaker demand, steel production remains robust. In November, the average daily crude steel output stayed above 1.95 million tons, reaching historically high levels. Additionally, the PMI index for the steel industry fell by 7 percentage points from October to 50.1%, still indicating relatively strong activity. However, demand remains weak, as construction site operations have declined since mid-October, leading to continued weakness in steel procurement. Zhou Ting warned that the recent rebound in rebar prices is short-lived and not indicative of a full market reversal. He pointed out that while infrastructure spending may contribute to steel demand next year, it is unlikely to see a significant increase. “As long as steel mills find it profitable to produce, they will keep increasing output, which will further strain the supply-demand balance and push prices lower,” he said. Looking at raw materials, China’s iron ore imports in November reached 65.78 million tons, up 16.73% from the previous month. The average import price rose to $109.97 per ton, an increase of 4.83%. This suggests that input costs are still rising, adding pressure on steel producers. Qiuyue Cheng, a senior researcher at Nisshin Shinkansen Group, believes that the domestic steel industry turned a corner in October, with falling costs and rising steel prices helping to improve profitability. Most steel companies still maintain a healthy profit margin, driving them to meet annual production targets. This has led to increased iron ore consumption. Meanwhile, coking coal and coke prices have also seen some gains recently. However, their fundamental outlook remains similar to that of rebar. Galaxy Analyst Ma Cheng noted that despite a rise in spot coke prices before December 12th, the 1305 contract did not follow suit, reflecting a bearish outlook on future demand. The steel industry still faces a pessimistic environment, with low inventory levels in coking companies providing some market support.

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