Steel Declines from 2-Month High

Steel rebar futures in China decreased to CNY 3,080 per tonne from a two-month high of CNY 3,120 reached on October 28th. This decline is attributed to weak demand from major consumers worldwide, which has overshadowed recent indications of reduced supply. The official construction Purchasing Managers' Index (PMI) in China dropped to 49.1, marking a tie for the record low and signaling a third consecutive contraction in the sector. This has been driven by diminished household purchasing power and governmental measures to curb the oversupply of housing, impacting the market outlook for rebar and other construction materials. Furthermore, escalating trade tensions between China and other steel-consuming countries have negatively affected demand, as steel mills face limitations in compensating for weak domestic consumption through exports. Nevertheless, supply expectations remain subdued, which has helped limit the downturn in the ferrous metal market. The Chinese government has also recently suggested a more rigorous capacity swap policy, which would prevent the addition of new steel capacity in vital regions and restrict the transfer of capacity from non-essential to key areas or within key zones.

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