Spot prices of rebar are expected to embark on a rally as lower supplies on production cuts will soon be reflected in the market and demand recovers on waning impact of the slow season.

Steel supply shrank as more steel mills produce with blast furnaces were on board to cut production after losses drove electric arc furnace (EAF) steelmakers into cutbacks. This lowered China's inventories of rebar on a weekly basis as of Thursday August 15, after five consecutive weeks of increases.

Supplies are expected to further decline this week on production restrictions.

As SMM surveyed, output across steel mills in Shaanxi, Shanxi, Gansu, and Sichuan declined by 35,000 mt per day. EAF steel mills in Sichuan cut output by putting furnaces into staggered suspension, with output expected to drop more than 400,000 mt in August.

Six major steelmakers in east China’s Shandong province agreed to cut production of steel building materials by a combined volume of 400,000 m this month. Meanwhile, maintenance across steel mills in other regions also increased.

Downstream demand will pick up as construction sites affected by Typhoon Lekima started to resume operation. Reconstruction need across flood-hit areas, and stepped-up construction work ahead of the 70th anniversary of the founding of China will also bolster demand.(From SMM)