Chinese rebar and hot-rolled coil (HRC) futures remained weak on Thursday as demand was still sluggish, according to Kallanish.

However, rebar outperformed HRC for the first time in a while, with the most-traded May 2024 rebar contract on the Shanghai Futures Exchange closing at CNY 3,481/tonne, up CNY 2/tonne, while the HRC contract lost CNY 25/tonne to CNY 3,692/tonne.

The outperformance of rebar was due to a larger weekly inventory drop compared to HRC. Rebar production is currently at its lowest level for the same period in the past four years, making it easier to draw down inventories when demand did not rise.

In contrast, HRC rarely drops faster than rebar because of its negligible inventory loss caused by high production. When prices started to slump earlier this month, sizeable crude steel output shifted from rebar to HRC to capitalize on higher margins, changing the relationship between the products.

However, HRC demand is still higher than the year-ago level due to stable manufacturing industries, even though both rebar and HRC futures have seen a drop in inventories in the past week, which stopped quick price declines.