Since December, rebar has shown limited upward momentum as downstream demand enters its off-season.

Short-Term Bullish Factors Emerge

The recent rebound of rebar futures to the upper boundary of its trading range stems primarily from three supportive factors: First, policy expectations have intensified, with the “anti-internal competition” trading logic gaining traction in December. Strong gains in related commodities have boosted overall market sentiment, lifting ferrous metals off their lows. Second, raw material prices have stabilized, particularly iron ore, which has shown remarkable resilience, providing cost-side support for steel prices. Third, inventory pressure has eased significantly amid low supply conditions.

However, the fundamentals for rebar have yet to show substantive improvement, with both supply and demand remaining weak overall. As year-end approaches, construction steel mills' production willingness has weakened, leading to a sustained decline in rebar output. The latest weekly production stood at 1.8168 million tons, firmly at a multi-year low for this period and down 20.27% year-on-year. Therefore, while low supply supports steel prices, expectations for a rebound in rebar output persist, gradually weakening the bullish effect.

Specifically, on one hand, short-process mills have seen significant profit improvement. According to Mysteel statistics, only 14.05% of 77 independent electric arc furnace (EAF) mills producing construction steel are operating at a loss. Under spot cost calculations, flat-rate electricity production has already become profitable in some regions. With improved profitability and manageable inventory pressure, short-process mills have increased production enthusiasm, potentially contributing to supply growth. On the other hand, the core factor previously constraining rebar supply—capacity quota restrictions—will ease after the New Year, creating conditions for production recovery.

Demand remains persistently weak. The latest weekly apparent demand stands at 2.0864 million tons, up 55,500 tons week-on-week but still at the lowest level for this period in recent years, down 7.42% year-on-year. Demand indicators such as daily high-frequency transactions and cement shipments also hover near five-year lows for this season, further confirming sluggish construction-related demand. Furthermore, downstream industry sentiment shows no signs of improvement, suggesting rebar demand will likely follow seasonal weakening trends. Should supply rebound as expected, industrial contradictions may intensify once again.

Cost Support Weakening

While iron ore prices remain elevated, providing some cost support for steel, their own supply-demand dynamics remain weak, making prices susceptible to downward pressure. Should ore prices decline, cost support for steel prices will diminish accordingly.

On the demand side, year-end production slowdowns at steel mills have led to a sustained decline in iron ore consumption. Daily pig iron output and imported ore consumption at 247 sampled mills tracked by SteelHome have fallen for five consecutive weeks, reaching relatively low levels. Meanwhile, profit improvements at integrated mills remain limited, with only 35.93% of mills reporting profitability. The weak demand pattern for iron ore is unlikely to change, with the only relatively positive factor being the restocking demand from mills ahead of the Spring Festival.

On the supply side, both domestic port arrivals and miner shipments remain at high levels for the year. Looking at the full-year data, cumulative iron ore shipments increased by over 45 million tons year-on-year, while arrivals at 47 domestic ports increased by only 19.12 million tons during the same period, a significantly lower growth rate than shipments. Most of this inventory will eventually flow into the domestic market, keeping overseas iron ore supply elevated. Even as domestic mines enter their seasonal slowdown, overall supply pressure remains unabated.

Overall, short-term bullish factors have pushed rebar futures back to the upper end of their trading range. However, the dual weakness in supply and demand persists, and with the off-season underway, upward momentum for steel prices remains limited. Rebar futures are likely to continue trading within a low-range pattern, with production recovery at construction steel mills warranting close attention.

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