[Christian Harris]

Steel rebar futures declined to CNY 3,200 per tonne in March, marking the lowest level in one month, as weaker-than-anticipated economic data from China amplified the effects of softer-than-expected steel output cuts.

Consumer and producer prices in China fell more sharply than forecast in February, signalling persistent weak demand for manufactured goods despite stronger credit aggregates reported in the previous month.

This economic slowdown has heightened concerns about the sustainability of domestic steel consumption, particularly as the property market continues to struggle.

The Chinese government announced plans to promote restructuring in the domestic steel industry to address oversupply issues, but the lack of specific details on the extent of capacity cuts has created uncertainty.

Earlier speculation had suggested that annual output reductions could reach 50 million tons, but the government’s vague announcement left markets questioning the scale and timeline of these measures.

This ambiguity has further dampened market sentiment, contributing to the decline in steel rebar futures.

Despite these challenges, China’s steel exports grew by nearly 7% year-on-year in the first two months of 2025, reaching 17 million tons.

This increase comes despite rising trade barriers, including anti-dumping levies imposed by Vietnam and pledges of similar measures from South Korea, Brazil, and Chile.

The surge in exports reflects China’s efforts to offload excess production amid sluggish domestic demand, but it also exacerbates global trade tensions.

The February data revealed a 0.8% month-on-month drop in coal prices, a key raw material for steel production, further pressuring steel prices.

Additionally, investment in real estate development fell by 9.0% year-on-year, with residential building investment declining by 9.7%, according to the National Bureau of Statistics (NBS).

These figures underscore the ongoing challenges in China’s construction sector, a major driver of steel demand.

The increase in steel exports has intensified scrutiny from international markets.

Vietnam, a major destination for Chinese steel, recently imposed temporary anti-dumping tariffs of up to 27.83% on certain steel products, while South Korea, Brazil, and Chile have signalled similar measures.

These actions reflect growing global resistance to China’s steel exports, which are often perceived as unfairly priced due to domestic overcapacity and government subsidies.

The combination of weak domestic demand, uncertain government policies, and escalating trade barriers suggests a challenging outlook for China’s steel industry.

While the government’s restructuring efforts aim to address overcapacity, the lack of clear targets and timelines raises questions about their effectiveness.

In the short term, steel rebar prices are likely to remain under pressure as markets await more concrete policy measures and signs of economic recovery.

In the broader context, China’s steel industry faces a critical juncture.

The government’s ability to balance domestic restructuring with global trade relations will be pivotal in determining the sector’s future trajectory.

As international trade tensions escalate, the industry must navigate a complex landscape of economic pressures, policy uncertainties, and shifting global demand patterns.

The ongoing challenges in China’s property market, coupled with weak industrial demand, continue to weigh heavily on steel consumption.

The government’s efforts to stabilise the economy through credit expansion and infrastructure investment have yet to translate into significant improvements in steel demand.

Meanwhile, the global steel market remains highly competitive, with countries increasingly adopting protectionist measures to shield their domestic industries from Chinese exports.

As China grapples with these issues, the steel industry’s ability to adapt to changing market conditions will be crucial.

The government’s approach to restructuring and capacity reduction will play a key role in shaping the industry’s future, but the lack of clarity in its policies has left markets uncertain about the path forward.

In the meantime, steel rebar prices are likely to remain volatile, reflecting the ongoing challenges in both domestic and international markets.

Chart: Trading Economics

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