Steel tumbles on high supply and weak demand

Steel rebar futures fell below CNY 3,190 per tonne on Thursday, marking their lowest level in two weeks as the market came under renewed pressure from elevated inventories and seasonally weak consumption.

The slowdown in demand has been compounded by recent bouts of adverse weather, including extreme heat in some regions and heavy rainfall in others, which has curtailed outdoor construction activity and further weighed on metals usage.

Traders are now awaiting a fresh round of Chinese economic and industrial data for clues on the scale and duration of steel production curtailments. Recent reports suggest authorities have ordered multiple mills in key producing provinces to temporarily halt operations this month, citing air quality concerns ahead of local events and policy pledges to curb overcapacity in construction inputs.

These measures are part of a broader effort to stabilize prices and counter deflationary pressures across the industrial sector, which has been facing sluggish domestic demand and intensified export competition.

Data from the China Iron and Steel Association added to the picture of tightening supply, showing that crude steel output from a smaller sample of member mills fell 7.4% in the final 10 days of July compared with the preceding period.

While this points to an initial impact from mandated production cuts, analysts caution that the demand backdrop remains fragile, with downstream sectors — particularly property and infrastructure — yet to show sustained signs of recovery.

Looking ahead, market participants will be monitoring both the scale of official production restrictions and any signs of seasonal demand recovery in early autumn. A combination of deeper supply cuts and stronger construction activity could help absorb high inventories and stabilize prices, but without a demand rebound, any price gains may prove short-lived.