Rebar is expected to see a recovery in the market.
Since the beginning of this year, the US "tariff storm" has continued to ferment, causing violent fluctuations in the global market. Market logic is dominated by macroeconomic pricing and risk aversion. Rebar Price also experienced a significant decline. On April 7, Rebar 2510 contract fell by 2.75%. Subsequently, although the tariff shock continued to escalate, its marginal impact on rebar prices weakened, and rebar prices began to stabilize. The meeting of the Political Bureau of the CPC Central Committee will be held at the end of April, and expectations of macroeconomic positive factors may become the main market driver, with rebar prices expected to see a recovery.
Weakening Tariff Impact
Recently, the US has imposed successive rounds of excessively high tariffs on China. Faced with the US's unilateral bullying and coercion, China has responded swiftly and resolutely. Currently, the US has increased its tariff rate on China to 145%, and China has subsequently upgraded its tariff rate on US imports to 125%. Recently, the US dollar, US stocks, and US bonds have experienced a "triple kill", and recession expectations have led to a decline in global commodities.
The US has long imposed high tariffs on steel from China. The proportion of Chinese steel directly exported to the US is low, only 0.8% in 2024. However, China has indirect re-export trade in steel, and additional tariffs may lead to a decrease in re-export trade volume. In addition, Southeast Asia, as China's largest steel export destination, may follow suit and impose additional tariffs on Chinese steel under pressure from US tariffs. Recently, Vietnam announced that it will impose an additional 37.13% tariff on steel from China starting April 16, posing a challenge to the high growth of China's steel exports.
However, the expected decline in steel exports due to trade frictions has been gradually digested in the price decline. At the current tariff level, the possibility of both the US and Chinese markets accepting each other's goods is already low, and the negative impact of tariff factors has temporarily come to an end. The market focus may shift to expectations of increased domestic policy support. On April 9, Premier Li Qiang of the State Council proposed at a symposium with economic experts and entrepreneurs that "we should implement a more proactive and effective macroeconomic policy, push forward the implementation of existing policies as soon as possible, and introduce new incremental policies as needed." At the same time, the Central Political Bureau meeting will be held at the end of April. Based on past experience, this meeting will analyze and study the current economic situation and economic work, and a new batch of policies to stabilize growth are expected to be introduced in the second quarter, possibly increasing support for infrastructure and real estate, driving steel demand, and boosting market expectations.
Accumulation of Supply and Demand Contradictions
This year, under the background of active macroeconomic policies, funds in the infrastructure sector have continued to rebound. According to market statistics, 363.4 billion yuan of new special bonds were added in March, an increase of 132.6 billion yuan year-on-year. However, against the backdrop of economic transformation, upgrading, and high-quality development, traditional infrastructure such as highway and railway construction, which have a high steel consumption coefficient, has performed below expectations, and steel consumption has been relatively limited. According to statistics from the China Construction Machinery Industry Association, a total of 61,372 excavators were sold in the first quarter of this year, a year-on-year increase of 22.8%, of which domestic sales were 36,562 units, a year-on-year increase of 38.3%. Excavator sales are usually regarded as a barometer of changes in demand in the real estate and infrastructure sectors. However, this year's apparent rebar consumption has decreased by 11.83% year-on-year, and has not increased significantly along with excavator sales. According to market feedback, the significant increase in sales mainly benefited from the accelerated demand for farmland transformation, new urbanization, and large-scale water conservancy projects, as well as the replacement cycle of existing equipment from the previous industry peak. The steel consumption of these projects is weaker than that of highway and railway construction in traditional infrastructure.
According to seasonal patterns, the apparent consumption of rebar will reach its peak around the Qingming Festival. Last week, the apparent consumption of rebar was 2.5268 million tons, an increase of 29,900 tons month-on-month, and the growth rate slowed down, falling short of the same period last year. As steel mills' profit levels are still acceptable, most steel mills are operating with positive gross profits, and rebar production has continued to grow, with production reaching 2.3237 million tons last week, a month-on-month increase of 37,200 tons. From a relative perspective, the current production-sales ratio is 0.92, which is higher than the historical average for the same period. Although total rebar inventories are still being continuously reduced at low levels, the destocking speed has slowed down, with steel mill inventories turning from decline to increase, and the supply-demand pattern has begun to weaken marginally, with fundamental contradictions gradually accumulating, making it difficult to provide a driving force for a resonant price increase.
Relatively Neutral Valuation
The main driving force behind the continuous downward shift in rebar valuation is the loose supply of coking coal, which continues to exert downward pressure from the cost side. This year, Lvliang City, Shanxi Province, clearly proposed the work approach of "compensating for price with quantity and non-coal with coal". In January and February, the cumulative output of raw coal in Shanxi Province reached 214 million tons, a year-on-year increase of 20.3%. Imported coal is also in a state of "increased quantity without increased price". In April, the customs clearance of Mongolian coal returned to over 1,000 vehicles. Sufficient supply has led to high inventories of coking coal, Coking Coal Price is under pressure. The long-term contract price of Mongolian coal in the second quarter is US$59/ton, down US$11/ton from the first quarter.
With the continued decline, if the near-month warehouse pressure is not considered, the coking coal price has gradually approached the cost range. The second quarter long-term contract price of Mongolian coal is equivalent to the warehouse cost of around 900 yuan/ton, and the loss of domestic coal below 950 yuan/ton will continue to expand, and the downward space of coking coal will continue to narrow. Currently, the blast furnace operating rate is still climbing. Last week's daily average Pig Iron Output was 2.4022 million tons, a month-on-month increase of 14,900 tons, which is the second highest level in recent years, and the resilience of raw material demand still exists, Coke The first round of price increase this week has been implemented. As the May Day holiday approaches, there is a demand for replenishing raw materials, and prices may have some support. Recently, during the decline in commodity prices, steelmaking profits have also shrunk. According to agency forecasts, last week Steel Billet gross profit was only 6 yuan/ton, a month-on-month decrease of 98 yuan/ton. Combined with the recent change of the basis of the main rebar contract from negative to positive, the rebar valuation is relatively reasonable.
Summary
In summary, the current fundamental contradictions in rebar are limited, and market logic is still mainly driven by macroeconomic factors. A series of tariff shocks since April have been fully priced in the price decline, and the subsequent market may focus on the expectation of positive domestic policy, and rebar prices are expected to see a recovery. However, due to weak demand, the rebound is expected to be limited. This week, we will pay attention to the release of domestic economic data.
