Producer pessimism to further weigh on rebar spot prices

SHANGHAI, Nov 21 (SMM) – The smaller impact of winter cuts from November 15 on rebar supply, together with falling prices of futures from the start of November, grew the  bearish outlook across steel mills.Mills were keener to destock and further lowered rebar spot prices by some 100 yuan/mt in Shanghai on the morning of Wednesday November 21. This followed declines of 80-170 yuan/mt across most regions on November 20. 

Falling spot prices narrowed profits at steel plants, which prompted them to use more, lower-grade cheap iron ore. This will cap the increase in iron ore prices, putting downward pressure on steel prices in the long run, SMM believes. 

Profits of rebar at steel plants, with iron ore as raw materials, narrowed to 581 yuan/mt as of Tuesday, SMM calculated from an imported ore price of $76.69/mt. 

Costs at mills that produced with electrical arc furnaces (EAF) stood mostly at 3,800-3,900 yuan/mt, an SMM survey found. This resulted in profits of some 100 yuan/mt. Those plants said they will cut production if spot prices continue to fall in the near term. 

In Shanghai spot market on the morning of November 21, Jiangsu Shagang Group, Yonggang Group, and Zenith Steel Group offered rebar at 4,000-4,050 yuan/mt.