Steel rebar futures fell to CNY 3,170 per tonne in March, the lowest in over two months, driven by a pullback in demand expectations and investor speculation about the potential scale of supply cuts that the Chinese government may mandate.
Steel retreats to two-month low
The slump in prices reflects a broader sense of uncertainty in the market, as investors remain cautious amid weak demand signals. Housing investment in China contracted by nearly 10% in the first two months of the year, while new home prices also fell from the previous month, reinforcing concerns that the country’s ongoing property crisis has yet to hit its bottom. The persistent weakness in property demand continues to weigh heavily on the rebar market, as property developers, historically the largest buyers of steel in China, face mounting financial stress.
Property developers to face liquidation pressures
The contraction in the housing sector has sparked fears that property developers will continue to face liquidation pressures this year, which would further reduce demand for rebar, the main material used in construction. This could exacerbate the oversupply in the steel market, with fewer buyers in the domestic construction and infrastructure sectors. Additionally, the increasing trade barriers from abroad have compounded the challenges for Chinese steel mills, as several countries—including Taiwan, Vietnam, South Korea, Brazil, and the United States—have either threatened or already imposed tariffs on Chinese steel exports. These protectionist measures threaten to undermine the ability of Chinese mills to offload excess steel to foreign markets, further tightening the global trade environment for steel.
Further challenges
The combination of weak domestic demand and external trade barriers has prompted the Chinese government to signal the potential for capacity cuts this year. Although the exact amount of the cuts has not been unveiled, the government’s intervention is expected to address the relative oversupply in the steel sector, which has been contributing to downward price pressures. However, the effectiveness of these measures remains uncertain, as domestic consumption struggles to recover, and external trade tensions continue to pose significant risks to China’s steel industry. With rebar prices under pressure and market sentiment fragile, the outlook for the steel sector remains clouded, and the full impact of the government’s capacity-cutting measures will likely become clearer in the months ahead.
