China’s Steel Prices Hit Three-Month Low Amid Weak Construction Sector

Steel prices in China have plunged to their lowest levels in over three months, driven by sluggish demand in the nation’s construction sector, the largest consumer of the metal alloy.

On Wednesday, rebar prices on the Shanghai Futures Exchange (SHFE) dropped by as much as 0.8% to 3,483 yuan ($478.73) per metric ton, marking the lowest point since April 8.

By midday, the contract had slightly recovered but remained down by 0.7%.Recent data from China indicates a slow recovery in domestic demand.

The construction sector, in particular, has shown significant weakness, with a double-digit percentage decline in activity over the first five months of the year.

This poor performance has heavily impacted steel demand, contributing to the falling prices.SHFE hot-rolled coil steel prices also fell to a new low since April 8, reaching 3,687 yuan per ton before stabilizing at 3,688 yuan by midday, down 0.5%.

Similarly, SHFE wire rod steel decreased by 0.7% to 3,665 yuan per ton, and stainless steel saw a 1.2% drop to 13,955 yuan per ton.
Wider Impact on Commodity Markets
The decline in steel prices extends beyond rebar and hot-rolled coil. The most-traded September iron ore on China’s Dalian Commodity Exchange (DCE) fell by 1.2% to 818.50 yuan per ton, while the benchmark August iron ore contract on the Singapore Exchange dropped by 2.3% to $106.90 per ton.

DCE coking coal prices decreased by 2.7% to 1,520 yuan per ton, and coke prices declined by 1.3% to 2,209 yuan per ton.Despite the downturn, market participants believe that the decline in steel prices may be limited.

“Although demand has been weak, it’s not like it has evaporated completely. So, any fall in prices will not be overly dramatic, especially given that a lot of the negativity has been priced in,” commented a trader.

The SHFE rebar contract is expected to find support around 3,360 yuan, while the hot-rolled coil contract is likely to stabilize around 3,600 yuan, according to market predictions.

Looking Ahead: Policy Hopes
Market participants are now looking ahead to China’s key political meeting next week, hoping for policies that could boost steel demand.

“There might be some talks of boosting the economy, but what the market is really looking for are details,” said the trader.

In summary, while steel prices in China are experiencing significant lows due to weak construction demand, the potential for policy support and the inherent demand in the market may prevent a dramatic further decline.

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