Price trend

According to data from SunSirs, after the Spring Festival, the price of rebar has made a good start, climbing to the highest price of 4,377.78 RMB/ton in the year (March 14), and then falling continuously, falling to the lowest price of 3,657 RMB/ton on May 5, and then rebounding slightly from a low point. March and April are originally the traditional peak seasons, but there was a situation where the peak season was not prosperous, with prices falling instead of rising. The fundamental reason is the rising contradiction between high supply and low demand.

Steel mill production reduction less than expected

After entering April, in response to the continuous decline in prices, steel companies have increased their maintenance plans. Steel companies in North China, Northwest, and Southwest regions have successively announced their maintenance and production reduction plans to the public. The operating rate has slightly decreased, but the overall decrease was relatively insufficient. The operating rate of rebar was 66.92%, a decrease of 3.85 percentage points compared to the beginning of the month, and the operating rate of wire rod was 68.4%, a decrease of 1.88 percentage points compared to the beginning of the month.

Raw material costs were downward

China's comprehensive liberalization of imports from Australia, coupled with an increase in Mongolian coal imports and domestic coal increases, had led to a shift in the supply and demand fundamentals of coking coal from tight to loose, resulting in a continuous decline in coking coal prices, leading to a decline in coking coal prices starting in April. The sixth round of coke reduction by 100 RMB/ton was quickly implemented. Iron ore is the biggest cost of steelmaking, and its prices were relatively strong in the first quarter, mainly determined by the mismatch between supply and demand. However, starting from May, with the seasonal rebound in overseas shipments, iron ore supply and demand will also shift towards easing, and there will be a certain degree of downward space for iron ore prices.

Weekly production and total inventory

From the data, it can be seen that both production and total inventory showed a slight downward trend, but the overall decline was not significant. As of May 4th, there were 9.8548 million tons of rebar in the total warehouse, with a weekly production of 2.7298 million tons.

Continued weakness in real estate

According to data released by the Bureau of Statistics, from January to March, the newly constructed housing area and real estate development investment decreased by 19.2% and 5.8% year-on-year, respectively, with an expansion of the decline compared to January to February. The real estate sector was relatively weak, and demand lacked support for the market.

Overall, the operating rate and output of steel enterprises have decreased, but the overall decline is relatively narrow, which does not match the contraction of demand and is the main factor contributing to the cumulative decline in the rebar market. What is the height of the rebound when the rebar hits the bottom?

Annual Price Comparison

Based on the annual price comparison chart of rebar in the past five years, it can be seen that in May, there were two years of decline and two years of increase, which is not in line with the traditional statement that May is the off-season.

According to the historical price curve data of SunSirs, from 2019 to now, except for the impact of the epidemic in 2020, the price of rebar had reached the lowest price of 3,400 RMB/ton in the past five years. This year's lowest price is almost the same as last year's double bottom, both around 3,650 RMB/ton, which is in line with the demand for bottoming out and rebounding. It can also be seen that there is limited room for further decline.

Supply pressure is still on

From January to March, China's crude steel production reached 26.156 million tons, a year-on-year increase of 6.1%. In March, the production increased by 6.9% year-on-year. Unless there are significant production restrictions in steel mills, supply will continue to suppress steel prices.

Demand may continue to shrink in May

With the implementation of the unified real estate registration system, downstream demand may continue to shrink, and the demand for construction steel in real estate may shrink by 8.97% month on month, which has expanded compared to April.

Market outlook

In summary, the rebar has fallen to the triple bottom position and there is a certain rebound demand. There is no obvious seasonal off-season characteristic of rebar in May. The overall supply and demand of rebar is weak, with low costs. Before there is a clear production restriction, the rebound height of rebar is limited, and there is not much room for decline. It is expected that rebar will fluctuate at low levels in the short term.

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