With China experiencing a particularly cold winter, and migrant workers starting to drift back to their home towns ahead of the Lunar New Year holiday rush, rebar prices look set to come under more pressure.
This could see some resistance to increasing iron ore prices as long steel producers will be unable to pass on the higher costs at a time when construction activity in northern China has wound down.
Rebar margins fell to $2.55/mt on Jan. 8, after averaging $32.31/mt in January, according to S&P Global Platts mill margin data. This is the lowest level since August 2019, when rebar margins turned negative due to surging iron ore prices following a tailings dam accident in Brazil.
Imported iron ore prices have hit their highest level since September 2011, reaching $171.75/mt CFR China on Jan. 8, compared with $119.05/mt at the start of November, Platts data showed. Domestic rebar prices in Beijing were Yuan 4,325/mt ($667/mt) on Jan. 8, compared with Yuan 3,845/mt on Nov. 2, a far lower price increase than iron ore.
Rebar production accounts for roughly 20% of Chinese steel production, Platts estimates.
In general, rebar producers in southern China are less affected by the cold weather and are therefore able to obtain relatively stronger margins compared with northern mills.
One southern rebar mill source said the company's current profit was around Yuan 200/mt ($30/mt) but he feared this would be unsustainable considering rising raw materials costs.
Domestic coking coal prices have risen strongly, due in large part to the ban on Australian coal imports, adding to the raw materials pressure.
