Posted on 29 Jun 2022
After a boost to the bearish market sentiment that has been fermenting for a week, Chinese rebar and hot rolled coil futures finally achieved a second straight day of increases on Tuesday. But the rise is still small, with limited fundamental support, Kallanish notes.
On the Shanghai Futures Exchange, the most-traded October 2022 rebar contract closed CNY 75/tonne higher than Monday at CNY 4,349/t ($650/t), and the same contract for HRC closed up CNY 60/t at CNY 4,399/t.
As the possibility of another sharp decline in steel futures has gradually faded, steel companies are still struggling to compress the prices of upstream raw materials such as coke. As of Tuesday, only one steelmaker had offered to cut coke prices by CNY 200/t, while others were on the sidelines.
On the real estate side, some companies are still trying to circumvent regulations banning price cutting in order to promote sales. A project in Nanjing is even allowing buyers to pay using watermelons valued at up to CNY 100,000, which effectively amounts to a discount on house prices. This follows other cities, which have allowed payment in wheat at fixed prices which imply a discount.
However, two similar events in Henan Province, themed on wheat and garlic respectively, were halted by the government after news of the schemes was widely spread. The launch of these activities reflects the current market downturn, while the restrictions on unconventional means of payment show that any real recovery will take time, partially suppressing expectations of a steel demand rebound.
Source:Kallanish
