We’ve examined the relationship between Brent crude oil and the price of Chinese rebar as the price of rebar fell nearly 50% over the last year. Though there is a significant bounce in September pricing, we believe it’s nothing but a dead cat bounce and that rebar prices will continue to fall.
The spot rebar price is +7% off the September 7 low, coinciding with the rip in most risk assets after the ECB announced its new bond-buying program. That makes intuitive sense – Europe is China’s #1 export customer. China likely has a bunch of steel it can’t get rid of or we’re not getting the entire picture.