Steel prices in China plummeted to a three-year low last week, primarily due to the weakness in its property sector, according to a Reuters report.
On May 25, the spot price of HRB400 20mm rebar, used to reinforce concrete in buildings and infrastructure, reached 3,510 yuan/t ($507.80/t) in Shanghai.
This marks the lowest level observed since April 2020 when the COVID-19 severely curtailed industrial activities in China. The decline in steel prices commenced with weak demand during the typically robust construction season of March and April. Steel rebar futures have dropped by nearly 17% since late March, and any potential recovery is expected to be delayed as China enters its traditionally slow summer months.
China's steel demand contracted by 3.4% in April compared to the same period last year, following an 8.7% increase in March. They further noted that demand in May witnessed a 2.5% decline year on year.
In January-April, data from the National Bureau of Statistics revealed a 6.2% year-on-year decline in investment in the property sector, the largest consumer of steel, during the first four months of the year. This deterioration comes after a 5.8% fall in January-March. Additionally, new construction starts by floor area contracted by 21.2% from January to April compared to the same period last year, worsening from a 19.2% fall in the first three months.
As a result of weak demand, steel mills are facing increasing pressure ahead of the summer months from June to August when construction activity typically slows due to high temperatures and heavy rainfall in the southern regions of the country.
At present, only a third of China's mills are currently operating profitably. The weak demand from China has also led to a plunge in the shares of global miners as iron ore prices decline.
China's steel demand is unlikely to improve until September when the weather becomes more favorable for construction activities. Furthermore, the economic stimulus measures implemented since late last year are expected to gradually impact the property market.
(Writing by Alex Guo Editing by Harry Huo)
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