The price spread between hot-rolled coil (HRC) and rebar has widened since the start of May, to 490 yuan/mt as of Friday May 25. This compared with a typical spread of 100-150 yuan/mt.
HRC in the Shanghai market was trading at 4,220 yuan/mt on Friday, while rebar stood at 3,730 yuan/mt.
High inventory of rebar weighed on its prices, while tight supply, or shortage for several specifications, pulled up the prices of HRC.
The higher price spread between HRC and rebar is likely to sustain through June to July as an estimated 900,000 mt of HRC output will be affected next month, when some mills in Hebei province have to put their production lines in maintenance after running at full capacity for a long time.
The price gap is then expected to narrow in July and August when demand for HRC declines during low season amid rising supply.
Separately, steel mills in Hebei including Chengde Iron and Steel and Handan Steel have increased their production of HRC and cut rebar output driven by higher HRC margins.
As of Friday, HRC margins amounted to 1,170 yuan/mt and those of rebar stood at 755 yuan/mt.