Steel rebar futures rose past CNY 3,100 per tonne, furthering the rebound from the near eight-year low of CNY 2,790 as markets continued to assess the magnitude of oversupply. Crude steel output in China fell 9.5% in July as plunging demand erased mills’ margins, offering relief to rebar futures amid their selloff. Still, prices remained 20% down year-to-date. China's economic slowdown drove demand for new housing to slump in past years, underscored by the fastest annual decline in home prices since 2015 during July. Also, its large-scale housing oversupply crisis and the CCP’s will reduce its dependence on metal-intensive sectors such as construction hampered the survival odds for debt-ridden property developers. Consequently, mills offset the plunging demand by ramping up exports at prices deemed low enough for dumping accusations by trade partners. Hence, pledges for trade barriers against Chinese steel ramped up uncertainty on mills' future ability to depend on foreign markets.
Newcastle coal futures recently traded above $145 per tonne, near the 8-month high of $150 reached on August 15th, driven by a robust demand outlook. This occurs even as China’s energy landscape undergoes a shift, with new coal capacity approvals in 2024 dropping nearly 80% compared to the previous year, signaling a potential move towards renewable energy. However, coal remains dominant, accounting for 65% of power generation in July 2024, with coal production reaching record highs that month, underscoring the ongoing reliance on coal. Globally, coal demand remains strong. The International Energy Agency predicts stable global coal consumption despite the expansion of renewable energy. Notably, China’s seaborne coal imports rose by 11% year-on-year in the first half of 2024, while Russian seaborne coal exports fell by 13%, reflecting a tightening coal supply in the market.
