[SMM Rebar Daily Review] Cost Support Weakens, Market Operations Turn Cautious

This week, rebar prices rose initially then fell, with the nationwide average price at 3,092 yuan/mt, down 20 yuan/mt WoW from last Friday.

Supply side, recently weakened strip and plate orders at some blast furnace steel mills led to hot metal diversion toward construction steel, and along with planned production resumptions of wire rod lines at certain mills, production increased WoW. EAF steel mills, however, faced difficulties in sourcing steel scrap and relatively firm scrap prices compared to finished steel, causing higher costs and worsening production margins. Some mills reduced operating hours, and some in east China even sold steel billets directly. As a result, electric furnace operating rates are now at mid-to-low levels, with limited downside room ahead. Demand side, phased price gains this week boosted speculative procurement activity, but high temperatures and heavy rains in many regions constrained incremental real demand from downstream projects, keeping overall nationwide trading performance lackluster. Inventory side, total inventory continued its off-season buildup trend this week, but the pace of buildup slowed. We note that market prices in Shandong are currently at the highest level nationwide, drawing steel mill resource inflows from the northwest, north China, and central China. These external resources weighed on local transactions and led to a notable increase in local resource inventories in Shandong, pointing to downside room for Shandong prices in the short term. Looking ahead, the first round of coke price cuts has been implemented, further weakening cost support. Along with the traditional off-season demand, rebar's own fundamental drivers remain weak, with room for the bottom price to shift lower. However, month-end macro-level news could potentially provide a floor. Overall, spot prices are expected to consolidate in the near term.