China’s rebar futures fell for the fifth consecutive session on Tuesday as the most traded May rebar contract on the Shanghai Futures Exchange was down by 1.2% at a two week low of CNY 2,511 (USD 405) by the close of the day
As per latest reports, spot sales of steel items is very sluggish in Chinese domestic market as no one is willing to stock at the moment anticipating further decline in steel prices although physical spot prices remained stable on Tuesday
In addition to overall slowdown due to lower growth, steel demand is slowing in northern China as cold weather has hit the construction sector, one of the biggest users of steel in China
Chinese construction industry is a key driver for domestic steel industry as it accounts for more than half of China’s steel consumption. China’s construction industry includes residential, non residential and civil construction.
Despite announcing New Norm of about 7% GDP growth the slow down seems to be accelerating China threatening to drive the growth below 7% and off late Chinese government is trying everything to put its economy back on a growth track.
The measures adopted by Chinese government in last 2-3 weeks include
1. Reduced interest rates
2. Announced stimulus packages
3. Eased the norms for real estate developers
These measures should have resulted in recovery in steel demand leading to improvement in prices, but the situation on ground remains unchanged and steel prices continue to move south
China’s steel consumption has slowed down in 2014 compared to previous years largely due to the slowdown in China’s real estate market, which accounts for almost 50-60% of steel consumption. Almost all of the Chinese real estate indicators are trending negative.
In China, steel consumption isn’t expected to show a dramatic uptrend. The World Steel Association estimates that China’s steel demand will grow by less than 1% in 2015.
Zhejiang Yaang Pipe Industry Co., Limited