According to Futures Daily, rebar futures prices rebounded last week after hitting a low, and domestic spot prices for rebar rose slightly in tandem, marking a corrective rebound across the ferrous metal industry chain. From an industrial perspective, rebar production is trending marginally downward, and costs are providing price support; however, sustained price increases lack effective backing from end-user demand, leaving the market in a range-bound oscillation pattern.
Fundamentally, data on domestic fixed-asset investment for the first half of the year was weak: real estate development investment declined year-on-year, and the pace of infrastructure funding implementation fell short of expectations. Compounded by the impact of high temperatures in the north and widespread rainfall in the south, outdoor civil engineering progress has generally slowed, and end-user procurement of construction materials has dropped to a yearly low. Weekly apparent consumption of rebar has fallen significantly, and market trading remains sluggish. Steel exports have also contracted, meaning overseas demand cannot offset the pressure from weak domestic demand. In the short term, demand expectations are unlikely to improve.
On the supply side, steel mills remain in a loss-making state, leading to increased voluntary maintenance and production cuts that have driven down rebar output; this marginal contraction in supply has somewhat alleviated inventory pressure in the steel market. However, blast furnace utilization rates have not yet dropped sharply, and total steel inventories remain high year-on-year. This combination of high inventory and weak demand continues to cap the potential for a rebound in finished steel prices. The recent rebound is largely a sentiment-driven correction resulting from short-covering rather than the formation of a clear bullish trend; the market is characterized by distinct short-term range-bound volatility.
Costs are providing strong support for rebar prices. Raw materials for rebar include coking coal/coke and iron ore. In the coking coal market, key support stems from routine safety regulations at domestic mines. Following safety accidents in major production regions, many coking coal mines reduced or halted production; even where operations resumed, actual output capacity remained significantly reduced. Coupled with strict controls on unauthorized over-production, the supply elasticity of domestic coking coal has been severely constrained, keeping spot prices firm. Iron ore prices have strengthened slightly due to periodic shipment contractions from overseas mines and rising shipping costs driven by geopolitical conflicts, though the long-term outlook of ample global iron ore supply remains unchanged. As domestic hot metal output continues to decline and daily iron ore consumption at steel mills gradually falls, iron ore prices lack the momentum for a sustained rise, offering only intermittent cost support to rebar prices.
When considering the combined factors of supply and demand, costs, and macroeconomic conditions, rebar is currently valued at a yearly low; supported by the costs of blast furnace raw materials and electric arc furnace production (using off-peak electricity), the risk of a sharp price drop has largely been priced in. However, two major bearish factors—weak end-user demand during the off-season and the continued accumulation of high inventories—cannot be resolved in the short term, limiting the sustainability of any rebound. In the near term, the market is likely to remain range-bound, making a sustained upward trend unlikely. Key factors to monitor going forward include the actual scale of blast furnace maintenance and the recovery of steel demand as the impact of typhoons gradually fades. Overall, range-bound fluctuation remains the dominant market theme.
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