SMM 2022 Rebar Market Annual Review

SHANGHAI, Dec 27 (SMM) - Rebar prices rose initially before falling back in 2022 and showed a downward trend as a whole. The price trend can be roughly divided into the following four stages. 

In the first stage (January-March): Rebar prices fluctuated upwards due to bullish expectations and environmental protection restrictions. On the macro level, at the beginning of the year, as China set the target for annual GDP growth rate at 5.5%, there were strong expectations for demand and consumption stimulus in 2022. After the Russia-Ukraine war broke out, natural gas, crude oil and natural gas prices, as well as the US dollar index hit new highs, and the price of rebar followed suit. Rebar prices soared 211.4 yuan/mt in the following 11 days. From a fundamentals point of view, news of production restrictions for the Winter Olympics was frequently reported. On January 18, relevant documents were officially issued. This tightened supply and lifted rebar prices. 

In the second stage (April-May): Shanghai was in two-month COVID lockdown, hurting the demand, and steel prices fluctuated downwards. On the macro level, externally, US inflation remained high. In May, the US CPI climbed to 8.6% after a substantial interest rate hike of 50 basis points. The market was gradually concerned about the recession of the global economy. In China, the lower limit of mortgage interest rates for first-time home buyers and the LPR were lowered on May 15 and 20 respectively. However, the short-term effect was not obvious, and the impact on rebar prices was small. From a fundamentals point of view, the outbreak of the pandemic in Shanghai hindered domestic logistics and transportation and led to sluggish terminal demand. The peak season was delayed, and rebar prices began to fall. On the whole, rebar average prices fluctuated between 4,707-5,068.1 yuan/mt at this stage.   

In the third stage (June-September): Rebar prices plummeted due to poor demand. On the macro level, the Federal Reserve raised interest rates by 75 basis points in a row in July and September, which led to a decline in the global commodity prices, and the price of rebar was also under pressure. Since June, many people failed to repay their home loans and property developers stalled their projects. In August, the central government vowed to take measures to ensure delivery of housing projects. However, this barely restored the market confidence. In terms of fundamentals, Shanghai lifted its lockdown in June, but the expected retaliatory consumption did not come. Instead, it was followed by extremely high temperatures in many places from July to August, floods in the south and drought in the north. Sichuan, Anhui, Jiangsu, Zhejiang and many other regions suffered extreme power shortages and implemented power rationing. Market confidence collapsed amid slack demand, sending rebar prices down from 4,785.1 yuan/mt in early June to 3,932.9 yuan/mt in mid-July. Heavy losses triggered massive output cuts by steel mills since July, pushing rebar output to a historically low level. As such, rebar prices bottomed out in late July and then rose slightly. Steel production recovered in September, but the peak season failed to arrive, thus steel prices fell back again.     

In the fourth stage (October-December): Rebar prices had little room to fall or rise amid weak supply and demand. On the macro level, in mid-October, an important meeting was held in Beijing. The meeting once again clarified that "houses should be for living rather than speculation" and that housing rentals should also be promoted. Pandemic broke out after the National Day holiday, taking a toll on end demand and driving rebar prices down from 4,114.1 yuan/mt at the beginning of the month to 3,751.3 yuan/mt at the end of the month. In November, China outlined 16 financial measures and three real estate financing measures in an effort to rescue the ailing property market, boosting market confidence over the real estate industry next year. Thus, rebar prices rallied, climbing 269.9 yuan/mt to 4,012 yuan/mt. However, demand in north China declined with onset of winter, and consumption was severely hit after China loosened COVID restrictions as infections surged, putting a brake on the rise in rebar prices.