Local Chinese longs prices still falling for now, but output cuts more obvious

During the past week ending August 12, average Chinese domestic rebar and wire rod prices have continued their downtrend amid declining rebar futures prices and weak seasonal demand. So far, the steel production cuts implemented by many Chinese mills due to their negative margins have failed to support finished steel prices.

The average rebar price has decreased by RMB 80/mt ($11.2/mt) compared to August 5, while the average 6.5 mm HPB 300 wire rod price has seen a decrease of RMB 93/mt ($13/mt). Rebar prices have edged down by RMB 27/mt compared to the previous trading day, August 9.

During the given week, rebar and wire rod prices have continued to move down, reflecting the continuing negative impact from the change in production standards for rebar and wire rod. Since steelmakers’ losses have increased, more producers have implemented production cuts, resulting in decreasing outputs of rebar and wire rod. Meanwhile, inventories of rebar and wire rod have declined at a faster pace, which gives hope that the current downtrend will eventually come to an end. However, in general, demand is not showing any significant improvement, which still negatively affects market sentiments. It is thought that rebar and wire rod prices in the Chinese domestic market will likely see a stable trend or a slight rebound as the reduction in output is bigger than expectations.  As announced last week, CISA members posted 8.1 percent decline in average daily crude steel production to below the 2 million mark in late July. According to market sources, the output level will definitely drop further for the early August period.

As of August 12, rebar futures at Shanghai Futures Exchange are standing at RMB 3,222/mt ($451/mt), decreasing by RMB 145/mt ($20.2/mt) or 4.3 percent since August 5, while down 1.95 percent compared to the previous trading day, August 9.

Average domestic rebar and wire rod prices in China's main markets are presented in the tables below.

Rebar prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

Wire rod prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

$1 = RMB 7.1458