Decrease in steel prices for the world's top producer

Steel prices in China are quickly returning to the ground. Reinforcing bar, a reference product used in construction, sank to its lowest level since August after a five-week retreat as demand surged.

The material has dropped 18% since peaking at a multi-year high in early December. At the same time, rebar inventories, which had fallen early last month, have begun to recover, increasing for four straight weeks. China is the world's largest steel producer, and investors are monitoring policy efforts to restrict supplies in the north to cut pollution this winter. Even when these measures remain in place until the spring, the factories are still producing enough rebar for stocks to rise. Buyers are concerned that prices have risen too quickly and consumption has now declined.

“Demand fell very quickly after December, when transaction volumes fell,” Zhao Chaoyu, an analyst at China Merchants Futures, said in a text message on Friday. "Steel mills are still making good profits, so they are unwilling to cut production, which leads to a rapid build-up of inventories."

Prices for other types of steel are also retreating. On Friday, the spot price for hot rolled sheet was RMB 4,145 per tonne, up from RMB 4,403 in December, and cold rolled sheet fell in the past four weeks, the longest decline since April.