Chinese rebar prices deepened their decline last week as property developers reported financial distress.

In Shanghai on Friday afternoon, 20mm HRB400 rebar was trading at CNY 3,580-3,600/tonne ($495-498/t), down CNY 40/t from the previous week, Kallanish assesses. The October 2023 rebar contract on the Shanghai Futures Exchange closed at CNY 3,691/t, up CNY 20/t compared with Thursday but down CNY 45/t from the previous Friday.

The spot steel market has seen very tough trading in the past week. It started to rebound on Friday after bottoming throughout the week, while the improvement in futures also helped restore traders’ confidence. Spot traders in Shanghai say most buyers waited for low prices before starting to place orders, and the recovery in sales led sellers to raise their offers again on Friday.

Major long steelmakers in eastern China held most of their long steel ex-works offers for the second ten days of August, but Shagang cut CNY 100/t from rebar and rebar in coil offers (see table below). Zenith and Yonggang did not adjust quotes, but provided CNY 130-220/t subsidies to sales agents to compensate for sales losses in the past ten days.

Negative news about Country Garden weighed on market confidence last week. The property company reported that its net loss for the first half of this year is expected to be CNY 45-55 billion, leaving it in the biggest difficulty since its establishment. Even though the company had anticipated the negative impact of Covid-19 on the market, the downturn in the real estate market this time has far exceeded its expectations. It also proposes four measures to ensure the normal operation of the company.

However, as the second-largest indebted real estate company after Evergrande, Country Garden is currently facing a total debt of more than CNY 1.4 trillion. This has undoubtedly become another major crisis in China's real estate market. How to resolve the company's liabilities has also become an important question affecting market stability.

Chinese construction steel ex-works prices (including VAT), 11-20 August 2023

 

Rebar HRB 400

16-25mm (CNY/tonne)

High-speed wire rod

6.5mm (CNY/t)

Rebar in coil

8-10mm (CNY/t)
Shagang offer 3,870 4,110 4,050
Shagang change -100 0 -100
Zenith offer 3,900 4,200 4,200
Zenith change 0 0 0
Yonggang offer 3,950 4,250 4,250
Yonggang change 0 0 0

Source: company information