Steel price

The main driver of the rebar market is the volume of new construction in China’s property sector. China produces about 250 million tonnes of rebar a year, more than 60% of global rebar output of roughly 400 Mt, and most of it is consumed domestically. New residential construction starts in China exceeded 1 billion m² a year at the peak. At an estimated use rate of about 85 kg/m², that alone generated roughly 85 million tonnes of rebar demand. The liquidity position of developers such as Country Garden, Evergrande and Vanke, mortgage conditions set by the People’s Bank of China and local government infrastructure programmes can feed into SHFE rebar prices within days.

The second major factor is Chinese supply discipline and environmental regulation. Beijing has used capacity quotas and output curbs for years to contain oversupply. During the winter pollution season from November to March, steel mills in the northern provinces of Hebei, Shanxi and Shandong are often forced to cut production by 20–50% to meet air-quality limits. That can move rebar prices at the start of winter. The annual crude-steel output ceiling of about 1 billion tonnes, associated with the “Common Prosperity” policy framework, also limits supply flexibility.

The third structural factor is the shift in raw-material inputs and production technology. Traditional blast furnace/basic oxygen furnace (BF/BOF) steelmaking uses iron ore and coking coal, so SGX iron ore and Australian HCC prices feed directly into rebar costs. One tonne of rebar requires about 1.6 t of iron ore and about 0.6 t of coking coal. Electric arc furnaces (EAFs), by contrast, melt scrap steel, so input costs are tied to the global scrap market, including Turkish HMS and US shredded scrap, and to electricity prices. China is seeking to raise the EAF share for emissions reasons, from about 10% now towards a target of about 20%, changing the cost structure of the steel industry.