PERSISTENT PRICE WEAKNESS
PERSISTENT PRICE WEAKNESS
By May 2025, the price of Shanghai rebar ex-warehouse was reported at around ¥3,130 per tonne.
Chinese rebar prices have followed a clear downward trajectory since mid-2021. After peaking at around ¥5,500 per tonne in May 2021 — driven by stimulus measures and a post-pandemic construction boom — prices began to decline, reaching the ¥4,000s by late 2021 and the ¥3,500s throughout much of 2022 and 2023. As the property market downturn deepened, prices dropped below ¥3,300 by late 2024. By May 2025, the price of Shanghai rebar ex-warehouse was reported at around ¥3,130 per tonne, which is only about ¥200 above the lowest prices seen during the most challenging periods of 2015 and briefly in August 2022.
Market participants widely regard the 3,000 yuan per tonne level as a critical break-even threshold for many blast furnace (BF) mills. If prices approach this level, further downside is generally considered limited, as mills are expected to reduce output to prevent deeper losses. For electric-arc furnace (EAF) mills, which rely on scrap (often expensive in China), the break-even point is even higher. During periods of low prices, many EAF furnaces have been idled, reflecting the sector's sensitivity to cost pressures. The ¥3,100 per tonne mark has effectively become a floor, with mills shutting down production lines to support the market when prices approach this level.
Market participants widely regard the 3,000 yuan per tonne level as a critical break-even threshold for many blast furnace (BF) mills. If prices approach this level, further downside is generally considered limited, as mills are expected to reduce output to prevent deeper losses. For electric-arc furnace (EAF) mills, which rely on scrap (often expensive in China), the break-even point is even higher. During periods of low prices, many EAF furnaces have been idled, reflecting the sector's sensitivity to cost pressures. The ¥3,100 per tonne mark has effectively become a floor, with mills shutting down production lines to support the market when prices approach this level.
MARGINS UNDER SEVERE PRESSURE
MARGINS UNDER SEVERE PRESSURE
The relationship between rebar prices and raw material costs has left Chinese steel mills with extremely slim profit margins. By May 2025, with rebar priced at around ¥3,130 per tonne and the total raw material costs (iron ore, coke and scrap) for an average basic oxygen furnace (BOF) mill exceeding ¥3,000 per tonne, gross margins were minimal. On 9 May 2025, industry data showed a ferrous feed cost of $324.58 per tonne for basic oxygen furnace (BOF) production (with 15% scrap), with a BOF rebar spread of only $115.42 per tonne FOB. After accounting for conversion costs, estimated at around $100 per tonne, profitability was effectively zero.
Some mills reported profits as low as ¥50–60 per tonne (approximately $8 per tonne), which is negligible in the context of industry operations. By the second quarter of 2025, many Chinese mills were operating at or below the cash cost of producing rebar, which is an unsustainable situation in the long term. This environment has increased the likelihood of further production cuts or coordinated maintenance downtime, as mills seek to avoid prolonged losses and stabilise the market.
Some mills reported profits as low as ¥50–60 per tonne (approximately $8 per tonne), which is negligible in the context of industry operations. By the second quarter of 2025, many Chinese mills were operating at or below the cash cost of producing rebar, which is an unsustainable situation in the long term. This environment has increased the likelihood of further production cuts or coordinated maintenance downtime, as mills seek to avoid prolonged losses and stabilise the market.