Chinese rebar prices continued to fall last week as extensive snowstorms further reduced demand. Traders are still hoping for lower prices before they restock, pointing to the second half of the month for a possible round of buying, Kallanish notes.

In Shanghai on Friday afternoon 20mm HRB400 rebar was trading at CNY 3,980-4,030/tonne ($613-620/t), down CNY 185/t from 27 December. On the Shanghai Futures Exchange the May rebar contract closed CNY 21/t lower than Thursday at CNY 3,798/t.

Weather was creating a significant regional variation in Chinese markets. In southern China, where the weather is mild enough for construction to continue, prices have been firm and sentiment is positive. In northern China meanwhile, demand has been very weak since mid-December and inventories were building despite production restrictions. Some of that inventory was being shipped to Eastern Chinese markets, to the extent that the price gap has now mostly closed.

Heavy snowfall and cold temperatures stretching south through central and eastern China have reduced demand in more key markets. At the same time, it has reduced the ability of northern suppliers to shift steel to southern markets. Combined with traders being still unwilling to restock, expectations are that prices could fall further. Traders are beginning to point to 15-25 of January as the last chance to restock before the Lunar New Year however, and may still hope to build inventory ahead of the post-holiday market recovery.