The Chinese rebar market continued its decline last week and buying levels also fell on a week-on-week basis, Kallanish notes.

In Shanghai on Friday afternoon, 20mm HRB400 rebar was trading at CNY 3,480-3,500/tonne ($486-490/t), down CNY 80/t from the previous week. On the Shanghai Futures Exchange, meanwhile, the January rebar contract closed at CNY 3,350/t, CNY 84/t higher from the previous day but CNY 96/t lower than the week before.

Spot steel prices had been depressed by the rainy weather, which left buying very low at the beginning of the week. End user buyers began to focus on low-cost purchases since Thursday, when weather improved and construction actuivity could pick up, leading to slightly improved demand.

On Friday, traders' expectations were boosted by positive news. Firstly, traders expect more production cuts in September to ease supply side pressure. Reports suggested Shagang will cut 100,000 tonnes of rebar supply in September, and Tangshan will also carry-out new restrictions on steel production. In addition, rumors were emerging that China will stop all steel production in the area to the north of the Yellow River from the end of September to the beginning of October for the national day holiday. There is no sign of any policy announcement suggesting this yet however.

Despite all the indications of possible support for the market, traders are still focussed on reducing inventories.