China Steel Market Jolted as New Quality Standards Trigger Sales

China’s steel market faces a turbulent period as new quality standards force traders to offload stockpiles, pressuring prices of the alloy and driving iron ore lower.

Fresh quality standards for steel rebar published by China’s State Administration for Market Regulation last month will kick in on Sept. 25, and traders are rushing to clear their existing inventories that adhere to old rules.

The summer lull, with steel futures in Shanghai down 16% this year on weak demand, poses a challenge for sellers, said Xu Xiangchun, an analyst with Mysteel Global. “Traders are panicking,” he said. “They are dumping rebar inventories on the market as they worry about stagnant sales.”

The slump in rebar prices has become yet another factor battering iron ore futures this year. Muted demand arising from China’s long-running property crisis and oversupply have made the steelmaking material one of the year’s worst-performing commodities. Prices briefly dropped below $100 a ton this week, after breaching the key threshold in March and April.