Threaded steel is expected to first decline and then rebound.
As the macroeconomic events that have been drawing market attention all came to a close at the end of October, coupled with the onset of the off-season for demand, rebar prices in the first week of November… Steel prices The market showed a one-sided downward trend, with the price of the most active 2601 futures contract briefly approaching 3,000 yuan/ton. Looking ahead, we believe Rebar prices Downside momentum is limited, and November may see a mixed trend—first declining, then rebounding.
Demand may have already peaked.
November is the traditional Reinforcing steel bars During the off-season for demand, apparent consumption of threaded steel fell by 136,600 tons week-on-week in the first week of the month, dropping to 2.1852 million tons—the first weekly decline since the National Day holiday. By industry, property-related demand continues to remain sluggish. However, infrastructure projects may see some accelerated construction activity before the year-end as local governments aim to meet their investment targets. Notably, a newly allocated quota of 500 billion yuan in local government debt has earmarked 200 billion yuan specifically to support investment and construction in several provinces. Still, the surge in infrastructure work is unlikely to fully offset the impact of the ongoing real estate sector adjustments, suggesting that demand for threaded steel may have already peaked.
Additionally, the contango between the rebar futures market and the spot prices has now widened to 153 yuan per ton, which may spur some demand for buying hedging positions. Spot traders may also choose to build up winter inventories through the futures market, thereby providing certain support to futures prices.
Supply still has room to decline.
The imbalance between strong supply and weak demand has squeezed profits in the black industry chain. As of early November, both long- and short-process rebar products have fallen into loss-making territory, with the proportion of profitable steel plants among 247 nationwide declining from a second-half high of 68% to just 39%. Meanwhile, following production restrictions implemented in the Tangshan region at the end of October, several other regions across China have recently unveiled their plans for intensified air pollution control measures during the autumn and winter seasons. It is anticipated that, as the heating season approaches, the scope of policy-driven production cuts may expand further. High-furnace daily average Iron and steel production Production has already dropped from 2.4236 million tons at the end of September to 2.3422 million tons, while capacity utilization among independent electric arc furnace enterprises fell by 2.12 percentage points week-on-week during the first week of November. With steel mill profits declining and environmental concerns continuing to weigh on operations, steel supply is expected to decline further in November and December.
Costs remain firmly supported.
In addition to weak demand, the decline in rebar prices during the first week of November was also influenced by Iron ore prices The decline has also triggered negative feedback within the industrial chain. But coking coal, Scrap steel Raw material prices continue to remain relatively strong. Amid the decline in steel prices, the warehouse receipts for Mongolian 5-grade coking coal rose from 1,330 yuan/ton to 1,376 yuan/ton, while in Zhangjiagang Scrap steel prices It rose from 2,140 yuan/ton to 2,170 yuan/ton.
Coking coal continues to show a declining production trend, while its fundamental outlook remains strong. Meanwhile, scrap steel is entering its off-season supply period, yet prices are also holding firm and performing relatively well. Iron ore Affected by the decline in molten iron production, prices still have some room to fall. However, it's worth noting that the contango—where futures prices are lower than spot prices—is gradually widening. Therefore, once molten iron output stabilizes somewhat, iron ore prices could potentially rebound. Overall, the cost support for threaded steel is steadily strengthening.
Macroeconomic expectations may strengthen.
November marks a macroeconomic policy vacuum period, Steel Market The focus remains on fundamental factors. However, from late November to December, macroeconomic expectations could strengthen once again. In October, the central bank already resumed buying and selling government bonds, and there’s a possibility of another LPR rate cut in late November. Meanwhile, at the beginning of December, the Federal Reserve will hold its final interest-rate meeting of the year. Following the previous meeting, where the Fed announced it would end its balance-sheet reduction by December 1, market attention is now shifting toward whether the Fed might introduce new measures regarding its balance sheet in December. Additionally, China’s Central Economic Work Conference is scheduled for late December, raising anticipation that policies aimed at stabilizing the economy could be further intensified. As a result, stronger macroeconomic expectations may provide crucial support for the steel market during the period from late November to December.
Overall, although steel demand may have already peaked, the current pattern of high premiums could still spur buying hedging activities as well as seasonal winter stockpiling needs. Meanwhile, the trend of shrinking supply is expected to persist, further bolstered by stronger cost support. Considering also the anticipated series of positive macroeconomic factors in December, we believe there is limited room for further declines in rebar prices. (Author’s Affiliation: Donghai Futures)
