The price of spot Chinese steel rebar has undergone a sharp drop in price since August of 2011 and continues to head lower month-after-month. While the price bounced back in August of this year, it was a dead cat bounce and quickly sold off. The price of rebar once correlated tightly with Brent crude oil until the Federal Reserve began quantitative easing which inflated the price of oil but not Chinese steel. Chinese steel is not a financialized market like oil markets have become, so investors can’t pile into Chinese steel as an “inflation hedge.” For the correlation to return, Brent crude would have to come down significantly and rebar would have to increase in price to some degree.
