Rebar prices in September will first decline and then rise
August Rebar The market returns to fundamental logic, with both futures and spot prices experiencing varying degrees of decline. As of September 1, the main rebar contract 2601 fell 5% compared to early August, and East China spot prices dropped 2.9% compared to early August. We believe the rebar market in September will show a trend of initial suppression followed by a rebound.
Changes in consumption affect market nerves
August is the traditional off-season for building material consumption, with real demand continuing to weaken. Rebar inventory Bottomed out in late July, then rose for five consecutive weeks, with a cumulative increase of 848,000 tons. In the last week of August, rebar inventory increased by 4.65% year-on-year, marking the first positive year-on-year growth this year. After September, the building material consumption peak season will begin, and the extent of demand improvement will become the focus of market competition.
July real estate data was weak, and policies still focus on reducing real estate inventory. Due to base effects and weather factors, infrastructure investment in July fell 1.95% year-on-year. In August, the construction PMI and new orders index were under pressure, and the operating rate of asphalt plants as well as Concrete capacity utilization and other leading indicators also adjusted to varying degrees. Therefore, during the peak season in September, rebar demand is likely to fall short of expectations.
Futures and spot arbitrage realization and warehouse receipt situation
In August, the rebar futures market continued to weaken, with the main contract discount to spot prices reaching as high as 179 yuan/ton. Futures-spot arbitrage positions will enter the profit realization phase, which will increase selling pressure in the spot market. In late August, Tangshan steel billets inventory declined for two consecutive weeks, indirectly confirming our conclusion.
At the same time, the near-month steel contract 2510 is approaching delivery. Currently, rebar warehouse receipts have exceeded 200,000 tons, reaching a historical high for the same period, which significantly suppresses the near-month contract and drags down the distant-month contracts. It is expected that before the 2510 contract rolls over, the weak steel market trend will continue.
Supply likely to increase first then decrease
In early September, there will be temporary production cuts in North China, but due to the short duration and many northern steel mills scheduling routine maintenance during the cut period, the impact is limited. Currently, more than 60% of the 247 steel mills nationwide are profitable, with long-process rebar profits around 133 yuan/ton. Under these circumstances, after the temporary production cuts end, rebar supply is likely to rebound. In August, short-process rebar output rose from 265,500 tons to 312,600 tons, and electric arc furnace operating rates increased to about 75%. Increased supply amid weak demand may further increase inventory pressure in September.
However, it should be noted that since August, steel mill profits have fallen from high levels. If the expectation of increased supply and weak demand in September materializes, there is a possibility of temporary losses for steel mills in the fourth quarter, which may strengthen their willingness to reduce production proactively. Additionally, the newly released "Steel Industry Stable Growth Work Plan (2025-2026)" reiterates the continued implementation of crude steel reduction and the fulfillment of annual production control targets. Based on the annual 5% crude steel reduction target, daily crude steel output from September to December needs to reach 2.36 million tons, a significant decrease compared to the 2.56 million tons daily output in July.
Market focus may shift to strong expectations
In late September, the market focus may again turn to winter stockpiling and next year's outlook. With the Federal Reserve's rate cut expectations materializing, domestic monetary policy easing space will further open. A series of important domestic meetings will be held before year-end, and expectations for policy strengthening will be reinforced again. Strong expectations may become the dominant factors in rebar price trends. factors.
In summary, the short-term fundamentals remain weak, peak season demand may fall short of expectations, supply is expected to rebound, rebar prices still have room to decline. Looking ahead to the fourth quarter, with expectations of policy strengthening and possible production controls during the heating season, rebar prices may return to an upward trend. (Author's affiliation: Donghai Futures)
