Shanghai Steel Rebar Futures Hit Record Low

Chinese steel futures hit an all-time low and iron ore contracts fell 3 percent, while fragile global demand for finished goods swayed amid slow economic growth.

Rebar for October delivery on the Shanghai Futures Exchange fell to $ 490 per tonne, the lowest level of most active contracts since March 2009. In construction, rebar is used to reinforce concrete in buildings, and is generally in demand during the warmer months, but its futures have been declining for the third straight week.

“The future of the steel market is not encouraging. Demand is not as strong as many expected, and steel production remains very strong,” said a trader in Shanghai. The largest steelmakers in China smelted a record 1,824,000 tonnes of crude steel in 10 days, according to the China Iron and Steel Association.

Overproduction has plagued China's steel sector for years, prompting the government to step up its program to close its older mills this year. Based on an estimate of industry sources, China has an annual production surplus of at least 200 million tonnes.

The impact of surplus production is more pronounced as China's economy grows at a slower pace and Beijing may need to launch additional stimulus measures to meet its growth target of 7.5 percent in 2014.