Prices of rebar in China’s domestic market have soared above those of hot-rolled coil (HRC) over the past few weeks after staying below the key flats price for more than a year, Mysteel’s latest price assessments show. Domestic industry sources suggest that steeper falls in the output of the former were responsible for the rebar price overtaking hot coil, but opinion remains divided on whether the longs price will retain its advantage.
As of October 8, the national average price of HRB400E 20mm dia rebar was still Yuan 106/tonne ($16.5/t) higher than the corresponding price of Q235 4.75mm HRC, according to Mysteel’s price assessment, rebar having first overtaken HRC on September 28.
For the past few years in China’s domestic market, transaction prices of rebar were largely higher than those of HRC due to stronger demand, even though hot coil production costs are over Yuan 200/t higher than rebar, market sources noted.
But since June 2020, a global supply crunch of flat steel blamed on disruptions to global steel production caused by COVID-19, pushed Chinese prices of HRC up faster than rebar, with the gap yawning to a peak of Yuan 533/t in HRC’s favour on July 8 2021, Mysteel’s data showed, before rebar leapt ahead.
Market sources said that rebar outpacing HRC was mainly because of a sharper fall in supplies of longs.
“Previously, the policy (of cutting steel output) mainly targeted the blast-furnace steel mills, but recently due to power rationing, electric-arc-furnace (EAF) mills (which mainly produce steel for construction use including rebar) have been greatly affected,” a steel trader based in East China’s Shandong province commented. He predicted that going forward, rebar prices might top HRC prices by Yuan 200-400/t.
Since early September, steel producers throughout the country including many in East China’s Jiangsu and Southwest China’s Yunnan, both home to many EAFs, have been facing elevated production curbs or even complete stoppages due to electricity shortages, as reported. Though power rationing in many regions has eased slightly entering October, supplies remain far from normal.
By the last week of September, weekly rebar output among selected Chinese mills had declined for four weeks in a row or down 25.8% lower on month, according to Mysteel’s survey across 137 rebar producers. Late last month production was at a near 19-month low of 2.48 million tonnes/week, though during the first week of October, output had recovered to 2.65 million tonnes.
In parallel, by the last week of September weekly production of HRC had declined to almost a 17-month low of 3.02 million tonnes but the total was only down by 4% on month. Hot coil output continued to slip to reach 2.97 million tonnes in the first week of this month, Mysteel’s survey among 37 HRC makers showed.
Nevertheless, market sources are still unsure about whether the high prices that rebars command now – and their advantage over HRC prices – can be sustained, given that rebar production may quickly recoup the tonnage lost through the power curbs while demand for both products will likely stay lukewarm.
“With the power rationing relaxed in some areas, some EAF makers are now resuming operations,” an industry source based in Southwest China’s Guangxi observed.
“I am still waiting to see what impact their resumption will have on the supply-demand balance,” she said.
Written by Olivia Zhang, zhangwd@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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