China Rebar Prices Extend Rally, Surpass Cold Rolled Coil Prices
October 2018
Steel demand growth in China is expected to end 2018 up by 4.7%, supported by growth in the real estate market despite efforts to reduce leverage, while government support for the economy to counter to the effects of the trade dispute with the US is expected to provide upside in the near-term.

The China rebar price averaged US$585/t for the month, up 0.2% from September. China Hot Rolled Coil (HRC) prices were down 3.3% month on month in October at US$531/t. Meanwhile, US HRC prices were down 2% month on month in October. China rebar prices continued to price above HRC in October and even exceeded Cold Rolled Coil (CRC) prices in late October, as manufacturing in China was impacted by the trade dispute with the US. The last time rebar prices overtook CRC prices was in May 2017, when the Chinese government mandated the elimination of induction furnaces which produces mainly rebar. As such, global steel prices fell 1.7% month on month but were up 6.4% year on year in October. Meanwhile, raw material prices rose in October, with iron ore and coking coal prices lifting by 5.5% and 9.6% month on month respectively.

China’s apparent finished steel demand is expected to have lifted 0.8% month on month in September, while crude steel production was up 7.5% year on year. Domestic steel rebar inventory fell 5% month on month to 4Mt in late October as winter production cuts commenced, while HRC inventory lifted 11% to 2.5Mt on slowing demand. Inventories of rebar and HRC products reached a two-year peak of 9.8Mt and 3.1Mt respectively in mid-March. The low level of rebar inventories should support rebar prices to the end of 2018, while HRC prices are weighed down by subdued manufacturing.

In October, the Canadian government adopted provisional safeguard measures on seven steel products to avoid steel dumping into Canada because of US steel tariffs. Canada imposed a 25% tariff on steel imports in cases where the level of imports from trading partners exceeds historical norms, effective from 25th of October 2018. The steel products include heavy plate, concrete reinforcing bar, energy tubular products, hot-rolled sheet, pre-painted steel, stainless steel wire and wire rod. Final safeguards are subject to inquiry by the Canadian International Trade Tribunal.