Steel rebar futures declined to CNY 3,020 per tonne in late May, approaching their lowest levels in eight months, as weakening demand expectations continued to outweigh the impact of anticipated supply constraints.
Steel declines toward eight-month low
The decline mirrored a broader pullback in ferrous metals, reflecting persistent concerns over sluggish construction activity and deteriorating macroeconomic sentiment in China. Contributing to the bearish tone, the Chinese government announced plans to revise laws to ban the pre-sale of unfinished homes — a practice that has long served as a crucial financing tool for property developers. If implemented, this policy shift could significantly disrupt the already strained liquidity of debt-laden real estate firms, undermining their ability to initiate new projects and, by extension, curbing steel demand from one of the industry’s key end users.
The external environment also posed headwinds. A wave of anti-dumping investigations launched by major steel-importing countries — including South Korea, Vietnam, Brazil, Mexico, and South Africa — threatened to restrict access to overseas markets. With domestic consumption faltering, Chinese steel mills have increasingly relied on exports to absorb excess production and sustain margins. Any tightening of international trade conditions would therefore further constrain demand and exacerbate the oversupply situation.
Beijing growing push for output discipline
In response to these challenges, industry associations and state-backed enterprises have aligned with Beijing’s growing push for output discipline. Top producers, such as Baosteel, signaled support for a national steel output mandate, with suggestions of a potential reduction in crude steel production by as much as 50 million tonnes this year. Such measures aim to stabilize the market by curbing oversupply, supporting prices, and aligning output with actual demand trends. Nevertheless, traders and analysts remain cautious, noting that policy intentions will need to translate into firm implementation to materially alter the market's trajectory, especially in the face of subdued construction activity and uncertain global demand.
