Steel rebar futures recently fell past CNY 3,300 per tonne, remaining close to the seven-year low of CNY 3,275 recorded on July 8th. This decline comes amid skepticism that economic support from the Chinese government will lead to a rebound in ferrous metal demand. A batch of weak economic data has intensified bets that Beijing will unveil concrete measures to support the slowing economic growth in its upcoming Third Plenum.

Weak Economic Indicators

China’s construction PMI fell to its lowest level this year in June, signaling a slowdown in the construction sector. Additionally, home sales declined by 17% compared to the previous year during the same period, and average home prices sank by 4% annually in May. These indicators suggest a significant slowdown in the Chinese property market, which is a major source of global steel demand.

Government Support Measures

Despite hopes for increased infrastructure spending, new measures aimed at reducing the elevated housing inventory in China to tackle the sharp decline in housing prices have negatively impacted the outlook for construction activity. This has jeopardized the survival of debt-ridden Chinese property developers, further exacerbating the bearish sentiment in the steel market.

Steel Demand and Production Cuts

The bearish pressure on steel rebar futures persisted despite expectations that mills would cut back output in the third quarter. The anticipated reduction in steel production is a response to the weakened demand outlook and aims to stabilize prices. However, the prevailing economic conditions and uncertainty regarding government support measures continue to weigh heavily on market sentiment.

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Impact on Global Steel Market

The current trends in the Chinese economy are critical as China is the largest consumer and producer of steel globally. The downturn in the Chinese construction and property sectors directly affects global steel demand and prices. Investors and market participants are closely monitoring the developments in China’s economic policies and their potential impact on the steel industry.

In summary, the recent fall in steel rebar futures below CNY 3,300 per tonne highlights the significant challenges facing the Chinese economy, particularly in the construction and property sectors. The market remains cautious, awaiting concrete measures from the Chinese government to support economic growth and stabilize the steel demand outlook.

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