Price trends

According to price monitoring by SunSirs, the domestic construction steel market last week (August 7-14) continued the sluggish trend seen since July, with prices characterized by narrow fluctuations and a slight downward shift in the overall price level. The market was essentially stuck in a state where prices could neither fall significantly nor rally effectively. On one hand, the 3,000 RMB/ton mark provided strong psychological support for market sentiment. On the other hand, end-user demand remained weak due to the traditional off-season, and downstream buyers pushed for lower prices; widespread "off-book" price concessions by traders further deprived the market of any real momentum for a rebound. As of August 14, the average price of HRB400 rebar in the Jiangsu-Zhejiang-Shanghai region stood at approximately 3,022 RMB/ton (down 0.23% week-on-week), while the average price of HPB300 high-speed wire rod was 3,262.5 RMB/ton (down 0.46% week-on-week).

In the spot market, the price center shifted slightly downward, with extremely limited volatility. Data monitored by SunSirs shows that as of the 14th, the average price of HRB400 rebar in the Jiangsu-Zhejiang-Shanghai region stood at approximately 3,022 RMB/ton, down 0.23% week-on-week; the average price of HPB300 high-speed wire rod was 3,262.5 RMB/ton, down 0.46% week-on-week. These figures indicate that the price adjustments seen in early August had largely run their course, with prices showing signs of stabilizing last week.

In the futures market, rebar futures exhibited a trend of fluctuating strength last week. The main contract found support near the 3,000 RMB/ton mark, rebounding into positive territory multiple times during trading sessions; the basis narrowed, with the October rebar basis stabilizing around -52 yuan. Against a backdrop of stable or even slightly declining spot prices, this periodic strengthening of futures was driven primarily by two factors: first, tight coking coal supplies and consecutive price rebounds on the cost side boosted market sentiment; second, there were expectations of a seasonal recovery in demand during August and September. Overall, however, the rebound potential for rebar futures remains limited, facing resistance levels at 3,100 yuan for rebar and 3,300 yuan for hot-rolled coils, with significant divergence between long and short positions persisting near the 3,000 RMB/ton level.

In terms of trading volume, the market followed a "rise-then-fall" pattern last week. Early in the week, market sentiment improved, driven by a rebound in steel rebar futures, prompting some end-users and speculative buyers to restock at lower price points; consequently, the total trading volume among major regional distributors increased by 18,820 tonnes compared to the previous period. However, in absolute terms, the daily average trading volume for construction steel remained at its lowest level for this time of year in recent history, down approximately 28.94% year-on-year. For instance, on August 12, the total national trading volume for construction steel stood at 77,097 tonnes—a decline of 12.23% day-on-day and 14.92% week-on-week—with the northern region experiencing a particularly sharp drop due to rainfall. Overall, the uptick in trading volume appears to reflect periodic restocking at low price levels rather than a genuine recovery in demand, casting doubt on the sustainability of this trend.

Supply side: The contraction in supply intensified last week, serving as the key factor preventing a further sharp decline in prices. The primary driver of production cuts was the widening scope of losses among steel mills. Profits at both blast furnace and electric arc furnace (EAF) mills were severely squeezed by the earlier sustained weakness in finished steel prices and reductions in coke prices; EAF mills, in particular, saw significant production cutbacks. Regionally, these cuts were concentrated in East China (including Jiangxi, Jiangsu, Sichuan, and Hubei), driven mainly by the diversion of molten iron to other product categories and rolling mill maintenance. Looking ahead to next week, supply is expected to tighten further as steel mills in Yunnan, Sichuan, Fujian, and Hebei begin maintenance operations. The price-supportive effect of this supply contraction will continue to manifest.

Regarding inventory, positive signals emerged last week, marking the end of a multi-week trend of inventory accumulation. Total inventory across the five major steel product categories stood at 16.2856 million tonnes, a week-on-week decrease of 246,300 tonnes (down 1.5%), with construction steel inventory accounting for a reduction of 148,500 tonnes. Social inventory of rebar was 5.1415 million tonnes, showing a slight week-on-week decline. However, it is important to note that this round of destocking does not reflect a substantive recovery in demand; rather, it represents a temporary, fragile balance resulting from the combined effects of supply contraction and typhoon-related disruptions. Social inventory of construction steel stood at 8.1133 million tonnes, remaining significantly higher than the level seen during the same period last year. Although rebar inventory in Hangzhou has decreased from its peak, it remains far above the 598,000 tonnes recorded at this time last year. Given the lack of sustained demand during the off-season and weak willingness to engage in speculative purchasing, social inventory is expected to shift from a decline to a slight accumulation next week.

Regarding costs and profits: The upward shift in the cost base has limited the downside potential for spot prices. As of August 12, the ex-tax production cost for rebar stood at 2,863.81 RMB/ton, an increase of approximately 27 RMB/ton since the beginning of the month. While the cost of iron ore has softened, tight coking coal supplies and a continuous rebound in their prices have raised the overall cost floor. Amidst persistent compression of steel mill margins, there is a notably stronger willingness to support prices.

Demand side: The lack of significant near-term improvement in demand remains the primary constraint on a price rebound. The market is currently in the traditional off-season characterized by high temperatures and heavy rainfall, with core issues—such as tight liquidity for end-users and a shortage of new project starts—remaining unresolved. Although apparent demand rose to 1.943 million tonnes last week (an increase of 160,000 tonnes week-on-week), this rebound was heavily distorted by Typhoon Dolphin (No. 13), which disrupted transportation and warehousing in East China; the failure of certain shipments in transit to reach warehouses resulted in some "inflation" of the apparent demand figures. Once weather factors are excluded, the actual improvement in demand appears limited. Transaction volumes remain down by nearly 30% year-on-year; downstream buyers are increasingly pushing for lower prices and purchasing strictly on an as-needed basis, showing little appetite for speculative stocking.

In summary, looking ahead to this week (August 15-21), the construction steel market is expected to maintain a pattern of narrow fluctuations—capped at the top and supported at the bottom—with prices struggling to establish a clear direction amidst conflicting bullish and bearish factors. On the supply side, the scope of losses among steel mills continues to widen, and electric arc furnace (EAF) production has been significantly curtailed; rebar output has dropped to a relatively low 1.8255 million tonnes, and with maintenance schedules proceeding across various regions, supply is expected to remain tight, serving as the primary floor for prices. However, a slight rebound in molten iron output and a marginal increase in "off-book" steel mean the contraction in supply is limited, providing insufficient momentum to drive prices up. On the demand side, the market remains in the traditional off-season characterized by high temperatures and frequent rainfall; core issues—such as tight funds for end-user projects and insufficient new construction starts—remain unresolved. Last week’s rebound in apparent demand to 1.943 million tonnes was partly distorted by Typhoon Dolphin, which prevented in-transit resources from entering warehouses; actual demand improvement was limited, and transaction volumes remain sharply lower year-on-year, making a substantial near-term recovery unlikely. Regarding inventories, while a destocking trend emerged last week (with stocks of the five major steel products falling by 246,300 tonnes), this was driven by supply contraction rather than demand growth. Furthermore, absolute inventory levels in regions like Hangzhou remain far above last year's figures; the "dammed lake" effect of high inventory continues to weigh on market sentiment, raising the possibility that the trend could shift from destocking to restocking this week. On the cost front, tight coking coal supplies and rebounding prices have provided some sentiment support for finished steel, but high iron ore inventories mean overall cost support remains weak. Overall, the mainstream spot price range for rebar this week is projected to be 3,000-3,080 RMB/ton, with the main rebar futures contract likely to test support at 3,000 RMB/ton and resistance at 3,100 RMB/ton; the short-term trend is expected to be characterized by weak fluctuations. A "wait-and-see" approach is recommended, with a focus on three key indicators: steel mill maintenance updates, the recovery of transaction volumes following the typhoon, and the sustainability of destocking. Marginal changes in these areas will be the primary basis for determining the short-term market direction.

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