Steel markets in China showed little reaction to the central bank's third interest rate cut in six months Sunday, May 10, with some citing the small magnitude of change as a reason. Spot offers for 18-25 mm diameter HRB400 rebar, a key construction material, were lowered by Yuan 20/mt ($3.20/mt) from Friday to Yuan 2,220/mt ex-stock Beijing on a theoretical weight basis, including 17% VAT, a trader there said.
"Market demand remains dull and hasn't been stimulated by the latest interest rate cut," said a rebar trader in Shanghai.
"Demand could further soften with the rainy season in the east approaching."
A source at a mill in central China noted that the extent of the interest rate cut was "small and well anticipated" by market participants, while weak market fundamentals meant physical rebar had not received a boost. In the hot rolled coil market, traders sought to ride on the news by hiking offers by up to Yuan 20/mt Monday.
An offer for Q235 5.5mm thick coil produced by Rizhao Iron & Steel was raised by Yuan 10/mt to Yuan 2,480/mt ex-stock Shanghai including VAT, market participants said.
Some added that while overcapacity and weak demand were weighing on steel prices, the market may still benefit from the rate cut in the longer term.
On the Shanghai Futures Exchange, the most active October rebar and HRC contracts were trading Yuan 19/mt, or 0.8%, and Yuan 23/mt, or 0.9%, higher respectively at the 11:30 am (0330 GMT) trading break.
