Chinese steel rebar futures held onto their recent decline in early September, trading around CNY 3,100 per ton, as rising raw material costs deepened losses at steel mills and outweighed the impact of stronger steel exports.

Industry data showed that average costs for hot metal and steel billets at major mills in Tangshan — China's largest steelmaking hub — rose sharply this week, pushing average losses at producers to more than CNY 100 per ton. Sustained losses at mills typically weigh on production decisions and feedthrough to rebar supply in the weeks ahead, a dynamic traders watch closely when margins turn negative.

China's non-manufacturing PMI, which covers the services and construction sectors, held steady at 49.0, matching July's reading and remaining below the 50-point threshold that separates contraction from expansion and at its weakest level since December 2022. The construction sector is a key end-market for rebar, so the soft reading points to continued weakness in the domestic demand picture that the September peak season was expected to revive.

At the same time, China's total steel exports rose 7.8% week-on-week to 2.55 million tons in the week to August 31, marking a third consecutive weekly increase and the highest level in nearly eight weeks. Strong overseas shipments have helped absorb domestic supply pressure this year, though trade tension over Chinese steel exports has been a recurring theme among overseas producers.

In August, steel prices rallied sharply as investors anticipated a demand recovery driven by seasonal factors ahead of the September peak construction season. The futures decline in early September suggests that rally has stalled as margin pressure and weak construction data offset export strength; upcoming official activity data and mill production decisions will indicate whether the seasonal recovery materializes.

Source: Trading Economics via Hellenic Shipping News