On June 25, China announced the mandatory standards for rebar which will replace the voluntary guidelines in place from 2018. However, industry players said they have been given too little time to reduce the existing inventories of rebar as the mandatory standards will be implemented on September 25, leaving only three months for market players to adjust, compared to the previous eight months which they had been allowed in 2018 before the previous change in standards.
In Zhejiang Province, the local Hangzhou Steel Trade Industry Association gathered on July 23 and asked China's National Association of Metal Material Trade to request a delay in implementation until January 1, 2025. "It has intensified market players' selling-off activities amid high inventories and weak demand in the traditional off-season and the downtrend in the real estate sector," the association stated.
In the January-June period this year, China's rebar production totaled 102.353 million mt, down 11.7 percent year on year, according to China's National Bureau of Statistics (NBS), due to the continuing weakening of the real estate sector.
Those traders who have high rebar inventories have had to reduce prices significantly to stimulate transaction activities. "Some panic has been seen in the rebar market as it is obvious that such high inventories will be very hard to sell in such a short period of time," a Chinese source said.
Rebar futures prices have decreased by 6.54 percent on July 25 to RMB 3,329/mt ($467/mt), compared to RMB 3,562/mt ($500/mt) recorded on July 1, reflecting the cautious sentiments among market players.
According to local media reports, China's State Administration for Market Regulation and Standardization Administration has not responded to requests, while the Shanghai Futures Exchange, which has yet to say whether it will accept rebar under the older standard after September, has not made any comments either.
Steelmakers, traders and market analysts have indicated that the switch to new standards will add RMB 20-30/mt ($2.8-4.2/mt) to production costs. Some market sources believe that, in the current market of poor demand and negative margins, more mills will choose to cut production and carry out repairs in August. However, market insiders think the most important issue is that market players do not believe the market can consume such high levels of rebar inventory in such a short period of time, especially as the current period is the traditional poor season for rebar consumption.
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