Steel hovers near one-month low

Steel rebar futures in China slipped below CNY 3,120 per tonne, marking their weakest level in more than one month, as traders reassessed both the scale of mandated production cuts and the degree of fiscal support from Beijing.

Fresh satellite imagery suggested that mills across China’s major steelmaking hubs continued to run at high utilization rates midway through the third quarter, despite prior expectations of a more aggressive curtailment under the government’s industrial policy revamp aimed at countering chronic overcapacity and avoiding a deflationary spiral.

In Tangshan, one of China’s largest steel-producing cities, authorities ordered mills to cut sintering output by 30% from August 25 and blast furnace operations by 40% from August 31.

While significant, the measures fell short of earlier market speculation of a full shutdown ahead of Beijing’s September military parade, an event typically accompanied by strict anti-pollution measures to ensure clear skies. The softer-than-expected scale of restrictions raised concerns that production discipline may not be strong enough to ease the current supply overhang.

On the demand side, the outlook remained fragile. China’s construction PMI for July slipped to its lowest level since January, reflecting slower project starts, weaker real estate activity, and weather-related disruptions, all of which dampened demand for construction inputs such as rebar. The property sector, traditionally a key driver of steel consumption, continues to face structural headwinds as new home prices decline and developers struggle with liquidity strains.

Meanwhile, Beijing pledged to implement a more expansionary fiscal and monetary stance, signaling measures to stimulate spending and investment. However, the government refrained from announcing large-scale stimulus packages, opting instead for targeted measures such as infrastructure spending support and small-scale credit programs. This tempered investor optimism, as markets had been hoping for a more forceful policy push to revive growth.

Altogether, the combination of softer-than-expected production cuts, persistent weakness in construction activity, and cautious fiscal policy left steel markets under pressure. Traders now await upcoming August PMI readings and any fresh policy guidance from the State Council to gauge whether demand conditions could improve into the fourth quarter, or if the market faces a prolonged period of oversupply and subdued prices.