For the past year or two, steel analysts and experts have talked
about how China’s market is now more open. Simultaneously, they discussed how
domestic steel demand had surged due to increased infrastructure spending. The
way they made it sound, low steel prices would soon become a thing of the past.
This week, prices for Chinese steel rebar fell to their lowest
level in three years. Last Thursday, the spot price for HRB400 20mm steel
rebar, essential for reinforcing concrete, dropped to roughly U.S. $507.80
(3,510 yuan) per ton. It appears that this year’s much-promised comeback won’t
happen anytime soon.
The primary factors behind price drops since the start of
FY24 are as follows:
- Insufficient
demand from China’s real estate sector
- Increased
Chinese steel exports to foreign countries
- Increasing
production expenses
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Steel Prices at Their Lowest Since
April 2020
The price decline has been severe, especially over the last
three months. Indeed, current steel prices are the lowest recorded since April
2020. That was when the COVID-19 pandemic first started to seriously hamper
industrial activity across China.
The slump began when demand fell off during the typically busy
construction season in March and April. Since late March, there has been a
sharp loss of about 17% in steel rebar futures, demonstrating clear
deterioration. With China entering summer, which is customarily slower, experts
believe any potential recovery will take several months.
Around 60% of steel demand in the world’s largest steel sector
comes from property and infrastructure projects. However, Reuters noted
that the slowdown in infrastructure stimulus and the housing market’s muted
expansion significantly impacted steel demand and prices.
According to the report, which cited analysts at Huatai Futures,
China’s demand for steel decreased by 3.4% in April and 2.5% in May compared to
the prior year. Demand previously rose by 8.7% in March.
According to data from the National Bureau of Statistics,
investment in the property industry, which uses the most steel, fell by 6.2%
annually between January and April 2023. This represents one of the worst
annual declines on record. Chinese steel mills have also struggled with growing
production costs for some years. As prices of raw resources like iron ore and
coal rise, steel prices continue to see the effects.
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