The rebar on the Shanghai Futures Exchange dropped as much as 0.8% to $479 per metric ton, the lowest level since April 8th. SHFE hot-rolled coil steel also fell to a low of $508 per metric ton, not seen since the same date. The weakness in the steel market has also extended to other steel products, with SHFE wire rod steel shedding 0.7% to $505 per metric ton and stainless steel dropping 1.2% to $1923.
The latest data from China indicates that domestic demand continues to recover at a slow pace, with construction activity showing a double-digit percentage decline in the first five months of the year. This has had a significant impact on the steel industry, which relies heavily on the construction sector as a primary consumer.
The property sector, which has been a key driver of steel demand in China, is also facing its own set of challenges. The country's property bubble has been a growing concern, with several major developers facing financial difficulties and homebuyers increasingly wary of making new purchases. This has led to a slowdown in construction activity, further dampening the demand for steel.
Despite the price declines, industry experts believe that the downward trend may be limited. A trader noted that "although demand has been weak, it's not like it has evaporated completely," suggesting that any further falls in prices are unlikely to be "overly dramatic."
Market participants are closely monitoring China's upcoming key political meeting, hoping for supportive policies that could potentially boost steel demand and address the property sector's challenges. As one trader commented, "There might be some talks of boosting the economy, etc., but I think what the market is looking for are details."
The steel industry's struggles in China reflect the broader economic challenges facing the country, as the construction sector and the property market, both crucial drivers of steel consumption, continue to grapple with sluggish activity. The ability of policymakers to introduce effective measures to stimulate demand and address the property bubble will be crucial in determining the future trajectory of the steel market in the world's largest consumer of the metal alloy.
