Rebar trading in China’s spot market was thin on Monday July 2 due to downpours at several regions and weak futures prices, we learned.
The Hangzhou market saw quiet trading activity throughout the day. Offers in the city rose 10-20 yuan/mt to 4,090-4,100 yuan/mt in the morning but fell back to 4,080 yuan/mt in the afternoon as the prices of futures dropped.
Given heavy rains in Chengdu, limited shipments left the warehouses there with poor trading liquidity.
Rebar spot prices are likely to face stronger pressure as steel mills gradually recover their production and as downstream demand stays sluggish. Both social and in-plant inventory of rebar across the country rose over the week ended Thursday June 28.
Steel mills in Xuzhou, Jiangsu province, are expected to resume operations in early July as they began to dry furnaces and other preparatory work in late June.We also learned that all steel mills in Wuhu, Anhui province, resumed their production from the week-long production cut and suspension on Sunday July 1.
Some rolling mills in Changzhou, Jiangsu have also resumed their production from a 50% production cut from June 21. Some 2,500 mt of average daily output of rebar was affected. However, sources at a few mills told us that they maintained their operating rates at 50% as it is difficult to buy billet.
Also in Changzhou, the 40-50% cut on blast furnaces and sintering machines across the region linger due to bad weather and the environmental reviews by the central government. The production cut was originally planned during June 1-30.
Full suspension at Danyang Longjiang Steel in Jiangsu sustains with 5,000 mt of average daily output being affected. While it is unclear when the production will recover, market participants believed one month would be the minimum requirement.
Separately, the US tariffs on $34 billion of Chinese products are expected to take effect from July 6. This is set to further weigh on rebar spot prices despite the reserve requirement ratios (RRRs) cuts at some banks effective from July 5.