Local Chinese longs prices fall, outlook still not bullish despite ultra-long special bonds announcement

During the week ending May 13, average Chinese domestic rebar and wire rod prices have moved down amid decreasing rebar futures prices and slack demand from downstream users. Futures and spot prices have posted small increases on Monday, May 13, following the government’s announcement of the sale of RMB 1 trillion ($140.8 billion) of ultra-long special sovereign bonds, with the first batch of sales due to start on May 17. However, in general, the near-term outlook for the long steel market in China is still not promising as the bond sales will have a limited effect on construction activities and steel demand in the short run.

The average rebar price has decreased by RMB 47/mt ($6.6/mt) compared to May 6, while the average 6.5 mm HPB 300 wire rod price has seen a drop of RMB 70/mt ($10/mt) week on week. Rebar prices have edged up by RMB 6/mt compared to the previous trading day, May 10.

During the given week, rebar and wire rod prices in the Chinese domestic market have declined amid the sluggish demand from downstream users. Coke prices have moved up further, while iron ore prices are at relatively high levels, reducing steelmakers’ profitability. This may lead to decreases in steel production capacity utilization rates for longs producers and, if so, this will provide support for rebar and wire rod prices up to the end of the month. Lately, more Chinese cities have lifted restrictions on real estate purchases, which will stimulate purchasing activities to a certain degree. Moreover, the news about the planned sale of RMB 1 trillion ($140.8 billion) of ultra-long special sovereign bonds, a development last seen in 2020, aimed at supporting the economy, has also supported sentiment in the steel market. “The real estate market is struggling. So, this news and possible interest rates cuts [expected in June] will provide support, but May will be difficult with no active demand seen,” a Chinese source said. The overall weak performance in the real estate market is unlikely to change in the short term, negatively affecting market sentiments. It is expected that rebar and wire rod prices in the Chinese domestic market will likely fluctuate within a limited range in the coming week.

As of May 13, rebar futures at Shanghai Futures Exchange are standing at RMB 3,686/mt ($519/mt), decreasing by RMB 49/mt ($6.9/mt) or 1.3 percent since May 6, while up 0.93 percent compared to the previous trading day, May 10.  

Average domestic rebar and wire rod prices in China's main markets are presented in the tables below.    

Rebar prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

 Wire rod prices in local markets

All prices include 13 percent VAT and all prices are ex-warehouse.

$1 = RMB 7.103