On July 31, the Financial Association News (Reporter Zhang Liangde intern reporter Yan Jiayi) reported that the new national standard for rebar will soon be implemented in September, and market participants, especially mid-stream circulation enterprises, panicked about old national standard rebar inventory and sales. The prices of major black series, mainly screw thread, continued to fall, and the spot market price of screw thread has dropped by about 500 yuan/ton from the high point of May.

In response, the China Metal Material Circulation Association (referred to as the China Association of Gold) issued six initiatives to stop national steel mills from producing old national standard screw thread steel and reduce the new national standard products in the near future, among others, to stabilize the national iron and steel production, circulation, and terminal enterprises yesterday.

Several industry insiders stated that the decline in screw thread prices was due to weak market demand, as well as the panic selling that was promoted by switching between the old and new national standards. The continued decline of screw thread prices also pulled down other black series commodities.

The transition period for switching between the old and new national standards is short. The market is accelerating the sales of old national standards.

On June 25, the State Administration of Market Supervision and Administration and the National Standardization Management Committee issued the Notice on Approval and Release of Eighteen Mandatory National Standards, including "Steel for Reinforced Concrete Part 1: Hot-Rolled Ribbed Bars", which clearly states the new national standards are GB 1499.2-2024 and GB 1499.1-2024 for hot-rolled ribbed steel and hot-rolled light round steel respectively, and will be implemented on September 25, 2024.

Gao Yupeng, of Beijing Depeng Trading Co. Ltd. told reporters from the Financial Association, "the transition period from the old national standards to the new national standards is only three months, which is indeed a tight schedule. Our cooperative steel companies have started to produce new national standard rebar in late July, and our company still has some old national standard products on sale. "

The new national standard has adjusted the weight deviation requirements for products. Overall, the deviation value between the actual weight and the theoretical weight allowed for each type of rebar can be reduced by 0.5% compared to the old standards. For example, the allowable deviation for 22-50mm diameter rebar has been reduced from +/-4.0% in the old standards to +/-3.5%.

The staff of Liuzhou Iron & Steel Co., Ltd. (601003.SH) stated that the new national standard did not make much difference in technology and did not greatly affect the cost.

Shenan Shenzhang, manager of Foshan Tilv Commodity Information Co., Ltd., told reporters from the Financial Association News, "the new national standard has reduced the weight deviation range, which may increase the cost of each ton of steel by 15-20 yuan. The impact on costs is limited. For steel mills, the transition from old to new standards in production is not difficult. However, since the old and new national standard rebar has different outbound and label receipts, it will be difficult to sell old national standard rebar after September 25th. "

Regarding the current market sales situation, Gao Yupeng said, "currently, terminal market purchasing customers do not have a particular preference for new or old national standards, but we are mainly selling old national standard products."

Meng Qingzeng, President of Tangshan Baochun Iron and Steel Research Institute, stated, "as of July 25th, the rebar factories had about 1.93 million tons of inventories, the social inventories had about 5.66 million tons, and the total inventories were about 7.6 million tons. The trading volume last week was 2.27 million tons. Normally, it would consume all the old national standard inventory in a month, but now the new and old national standard rebar competes in the market, which may have an impact. "

Due to concerns that the old national standard rebar inventory cannot be cleared, the market is in panic. Some enterprises have adopted discount sales, and the China Association of Gold has issued feedback on relevant issues to the China Iron and Steel Association and related departments, and proposed initiatives to the upstream and downstream of the industry to stabilize the market.

The six initiatives proposed by the China Association of Gold include: 1. urging the industry to overcome panic and avoid selling-off; 2. national steel mills to stop producing old national standard thread by August; 3. steel mills to reduce production output of new national standards; 4. trading enterprises should sell old national standard rebar; 5. trading enterprises should not purchase old national standard rebar after August; 6. terminal customers can purchase limited quantity of old national standard products within a buffer period.

The six initiatives proposed by the China Association of Gold (Source: China Association of Gold WeChat public account). Industry insiders expect that the market has basically bottomed out after the decline in previous bearish sentiment, such as for screw thread.

China Securities Association's six-point proposal (image source: China Securities Association public account)

Meng Qingzeng said that the price drop of screw thread and other black series products was mainly due to emotional impact. On the one hand, the off-season demand is indeed weak, and the market is eager to clear the backlog of old national standard rebar, resulting in selling-off and trampling, but the expected decline in the market price has been basically digested.

Zheng Xiaochun, the person in charge of Tangshan Tangxuan Steel and Trade, told Caijing that there are indeed old national standard inventories in the market, but with the digestion of various specifications of steel bar inventories for more than a month, some specifications of old national standard steel bars may have structural shortage. The midstream and downstream enterprises will gradually begin to structurally replenish their inventories, which has a strong supporting effect on the market price. It is expected that the market price has reached the bottom and the threaded rod price will gradually rebound.

Due to the continuous decline in threaded rod prices in the early stage, some building steel mills continue to suffer losses. The market's reduced production has increased. The weekly output of threaded rods has decreased by 0.0678 million tons. Supply continues to shrink. The expected reduction in steel enterprise production and its intensity are still increasing, which may support threaded rod prices.