Rebar and HRC are near the cost of EAF steel mill production (static at RMB 3,535/t). Fundamentally speaking, supply and demand are neutral. The current downturn can be attributed to two main factors. Firstly, there is anticipation of a significant decrease in long-term coking coal prices, although this has not been fully confirmed yet. This expectation has led to a reduction in steel production costs, thereby causing a decline in steel prices.
Secondly, there is a prevailing pessimism in macroeconomic sentiment. Combined with moderate demand for ferrous materials, this has considerably undermined market confidence in future demand.
Additionally, recent weather conditions and building material transactions suggest that short-term steel consumption is likely to remain sluggish. Heavy rains in East China, expected to persist until the end of next week, have caused floods in provinces like Anhui and Hunan, further dampening market expectations for this month.
Speculative activities in the short term have also been lackluster, characterized by minimal trading volumes in short futures and long spot trades. Overall spot liquidity remains quite poor under these circumstances.
Note: This article has been written in accordance with an article exchange agreement between Horizon insights and BigMint.
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