Steel rebar futures climbed to CNY 3,135 per tonne in May, marking the highest level in six weeks, as the broader ferrous metals complex gained momentum amid a more optimistic outlook for global trade flows.
Steel rises to six-week high
The rally was fueled by the recent agreement between the US and China to temporarily lower bilateral tariffs for the next three months, a move aimed at de-escalating their protracted trade war. The development eased fears of a prolonged slump in global manufacturing demand and alleviated concerns that the broader consumer sector could face additional headwinds this year. Market participants welcomed the easing of trade tensions, viewing it as a positive step for steel-intensive industries such as machinery, automotive, and infrastructure.
Adding to the bullish tone, Baosteel, one of China's leading steelmakers, hinted that Beijing may soon impose a nationwide production cut in steel goods in a bid to tackle persistent overcapacity issues and address the sustained weakness in construction activity. Although no official directives have been announced yet, market sources indicated that the scale of the potential cut could be significant, with estimates suggesting a reduction of up to 50 million tonnes in crude steel output this year. Such a move would represent a substantial tightening of domestic supply, supporting steel prices and helping stabilize margins for producers grappling with softer demand both at home and abroad.
Concerns on China property sector caps upside
However, the upside in rebar prices remained capped by renewed concerns over the health of China's embattled property sector, a key driver of domestic steel consumption. Reports circulated that Chinese regulators are considering a sweeping overhaul of property sales laws, potentially prohibiting the common practice of selling homes before their completion—a financing model widely used by developers to maintain cash flow and fund new projects. If implemented, the new rule could severely disrupt liquidity channels for major developers, many of whom are already struggling under mounting debt loads and weak sales. Analysts warned that such a policy shift could amplify the financial distress in the property market, dampen new project starts, and further erode steel demand from what has traditionally been one of the sector’s largest consumers.
Overall, while the recent developments in global trade and potential supply curbs have lent support to steel prices, market sentiment remains fragile, with traders carefully monitoring policy shifts in both the construction and property sectors. The balance between reduced supply and uncertain demand prospects will likely dictate price action in the near term, as investors weigh the broader implications of Beijing’s evolving regulatory stance and the durability of the global trade truce.
