I. Bottom Line & Directional Bias
This report holds a bearish view on Rebar (SHFE.RB).
The view is based on three core reasons:
1. Weak technical pattern: As of the [10-09 settlement], RB2701 closed at CNY 3,080/t, sitting in the lower region of the price range over the past 20 trading days (percentile rank 16.3%). Although it was flat versus the prior settlement on the day, it has fallen 1.22% cumulatively over 5 days and 1.97% over 20 days, with the short-term moving average system in a bearish alignment, indicating significant upside pressure.
2. Negative flow dynamics: The main contract exhibited a “rally on open interest cut” on [10-09], with notional open interest down CNY 407m and total open interest down 13,220 lots. Such a move is typically interpreted as a passive rebound driven by short covering rather than aggressive long initiation. Meanwhile, the top-20 seats held a net long of only 37,885 lots, up just 390 lots on the day, indicating that institutional capital has not formed a concerted bullish push.
3. Macro headwinds: The coming week brings China CPI/PPI (10-14) and a slew of macroeconomic data releases (10-19). With the slope of domestic demand recovery slowing, if real estate investment and sales data fail to improve beyond expectations, ferrous commodities face valuation downgrade risk.
Invalidation condition: If RB2701 closes decisively above pivot resistance R1 (CNY 3,094.33/t) on the daily chart, accompanied by a significant increase in open interest (single-day rise > 2%), the bearish trend would be considered temporarily over, requiring a reassessment of the long/short balance.
II. Price Action & Technicals
In recent price behavior, Rebar has shown a clear stabilization after a choppy decline, but the rebound lacks strength.
Key levels and channel analysis:
Based on the [10-09 settlement] data, RB2701 closed at CNY 3,080/t. This price sits at the lower edge of the 20-day high-low range (CNY 3,060–3,183/t), with a specific percentile rank of 16.3%, showing extremely oversold characteristics but also implying large upside room versus fragile downside support. On intraday volatility, the ATR14 indicator is CNY 28.29/t, equivalent to 0.92% of price, indicating that the current intraday range has narrowed and trading activity has declined. This is corroborated by RV20 (20-day historical volatility) falling to a low of 10.5%, suggesting the market is in a quiet period ahead of a directional break.
Pivot point strategy application:
Using the classic pivot point formula, the current central pivot P is CNY 3,079.67/t, the first resistance R1 is CNY 3,094.33/t, and the first support S1 is CNY 3,065.33/t. Notably, the current price of CNY 3,080/t is almost glued to pivot P, only about CNY 14.33 away from R1, less than half an ATR (CNY 14.145). This means that absent a major bullish catalyst, price is unlikely to break R1 resistance in one move. Conversely, a break below S1 (CNY 3,065.33/t) would open the door to a test of the 20-day low at CNY 3,060/t.
Candlestick pattern review:
Looking at the last 5 confirmed settlement daily candles:
- 09-28 to 09-30: Price consolidated narrowly between 3,105 and 3,112, attempting to form a platform but failing.
- 10-08: A large bearish candle appeared, with a high of 3,100, a low of 3,060, and a close of 3,061, confirming the short-term breakdown.
- 10-09: A doji or small bullish candle formed, opening near 3,061, with a high of 3,094, a low of 3,065, and a close of 3,080. This candle shows fierce contest between longs and shorts in the 3,060–3,090 range, with buyers ultimately slightly ahead and recovering some ground, but the contraction in volume and open interest suggests the counterattack lacks sustainability.
Night session dynamics:
[10-09 night session] data show Rebar continued a mild rebound, starting from 3,081, touching a high of 3,104, and closing at 3,098, up 0.58% versus the day session settlement. This gain came close to the R1 resistance (3,094.33), validating our intraday view on resistance. However, as night session liquidity is typically lower than the day session and no clear open interest build was seen, this rebound looks more like a technical repair than a trend reversal.
Overall, on the technicals, R1 (3,094.33) overhead is strong resistance, while S1 (3,065.33) is the last line of defense. Until open interest flows back meaningfully, we recommend maintaining a sell-on-strength approach, targeting the 20-day low of 3,060 or lower.
III. Supply-Demand Balance & Fundamental Drivers
On the fundamentals, Rebar is currently in the tail end of a typical “off-season inventory build” and a “peak-season falsification” phase, with a weak supply-demand pattern unchanged.
Limited supply-side constraints:
Although steel mill margins have been compressed, supply elasticity remains as blast furnace utilization has not seen large-scale cuts. Given that the specific value of the [10-09] paper margin (RB−1.6×I−0.5×J) is not directly provided in the snapshot, we cannot precisely quantify mills' immediate profit, but with price at a 20-day low and volatility converging, subdued production enthusiasm is the more likely scenario. That said, as long as scrap resources and iron ore costs do not collapse sharply, crude steel output is unlikely to fall rapidly and significantly, providing implicit support at the bottom of prices and limiting the downside.
Weak demand dominates:
We are now in the latter half of the traditional “Golden September, Silver October” peak season, but actual demand release has fallen short of expectations. Real estate, the largest downstream consumer of Rebar, continues to show weak high-frequency data. On the coming October 19, several heavyweight macro data points will be released, including fixed asset investment, real estate development investment, and new home prices. The market expects these to show that the economy's endogenous momentum remains insufficient, especially with property sales and new starts likely to remain in negative year-on-year territory. This will directly undermine confidence in the pace of steel destocking.
Inventory cycle perspective:
With both social and mill inventories at relatively high levels, any marginal weakening in demand will stall destocking or even push inventories higher. Combined with seasonality, the average return over the same 20 trading days in the past 15 years is -0.43%, with a median as low as -1.27%, and only 6/15 years posted gains. This indicates that this period historically faces the risk of a cliff-like demand drop. The current -1.22% (5-day change) has already slightly underperformed the historical average, signaling that this peak season is lacking in substance.
Macro transmission mechanism:
While Chinese policy is growth-stabilizing, transmission to real physical activity takes time. The CPI and PPI releases on October 14 will be key to testing inflation expectations. If the PPI year-on-year decline widens or the month-on-month reading weakens, deflation concerns will intensify, weighing on industrial commodity prices. In addition, the US Dollar Index remains elevated at 102.21 and the US 10-year Treasury yield is as high as 5.24%, with tight global financial conditions also suppressing overall commodity valuations. For Rebar, external macro headwinds combined with an internal demand vacuum leave the fundamentals without upward drivers.
Therefore, the core fundamental contradiction is supply rigidity versus insufficient demand elasticity. Until strong fiscal stimulus is implemented and translates into actual construction steel demand, prices are more prone to fall than to rise.
IV. Positioning Structure & Fund Flows
Changes in the positioning structure reveal that market participants are leaning cautious, with clear signs of capital outflow.
Main Contract Positioning Analysis:
As of [10-09], the total open interest of Rebar main contract RB2701 stood at 1,673,458 lots, down 13,220 lots from the previous trading day. Meanwhile, the price edged up 0% (flat). This combination of “flat price with falling volume” or “slightly higher price with falling volume” is typically viewed in technical analysis as a short-covering signal rather than fresh long entry. In other words, prior short positions were closed out to lock in take-profit targets or to avoid weekend/long-holiday risk, pushing prices higher, but this was not driven by new buying.
Notional Positioning Change:
The notional value of the main contract was approximately CNY 100m 515.4, with a single-day net outflow of CNY 100m 4.07. The withdrawal of capital further corroborates the heavy wait-and-see sentiment. Against the backdrop of large capital unwilling to establish new positions at this juncture, retail or major long forces appear thin and unable to reverse the downtrend.
Top 20 Seat Movements:
According to the holdings data of the top 20 futures company seats, total long positions amounted to 1,598,245 lots (down 1,073 lots d/d), while total short positions amounted to 1,560,360 lots (down 1,463 lots d/d). The net position was net long 37,885 lots, up 390 lots from the prior day.
Two points warrant attention here:
1. Both longs and shorts are cutting positions, indicating that mainstream institutions are narrowing their divergence on this variety, or are exiting the battlefield altogether while awaiting clearer signals.
2. Although the net position is long, the increment is minimal (only 390 lots), negligible relative to the million-lot total open interest. This suggests that the so-called “long advantage” is very fragile; once prices correct, this net long book could easily turn into selling pressure.
Implied vs. Realized Volatility Divergence:
The current 20-day historical volatility (RV20) is only 10.5%, at a low level. Typically, a low-volatility environment tends to breed large one-sided moves. Given the current loose positioning structure and ambiguous direction, if upcoming macro data (such as the 10-14 CPI/PPI) disappoints, it could trigger a rapid selloff, during which volatility would spike quickly. Investors should be wary of this “undercurrent beneath the calm.”
Overall, fund flows do not support a bullish view. Rebounds on falling open interest are often bull traps, especially in the absence of new major capital inflows. Traders are advised to monitor open interest changes closely; should heavy-volume declines reappear, that would be the optimal time to confirm a short trend.
V. Cross-Asset Relative Value & Global vs. China Markets
Through cross-asset relative value and macro indicators, we can more comprehensively position Rebar's relative strength within global asset classes.
Copper-Gold Ratio & Economic Expectations:
As of [10-09], the Copper/Gold ratio stood at 1.59, at the 98.02th percentile over the past 1 year and the 58.33rd percentile over 3 years. Copper is known as “Dr. Copper” for its high sensitivity to economic growth. An extremely high Copper/Gold percentile suggests that global manufacturing activity remains resilient, or at least that market pricing embeds some reflation expectations. However, for China's Rebar, the guidance from this signal is somewhat discounted. China's steel demand is highly dependent on real estate, whereas global copper demand is more tied to power, new energy, and general manufacturing. The structural difference in demand leads to divergence: even if global industrial metals are strong, Chinese construction materials may still weaken due to the property drag. Therefore, a high Copper/Gold ratio does not directly imply Rebar strength; rather, it may highlight the relative undervaluation or independent weakness logic of China's black complex.
Gold-Silver Ratio & Safe-Haven Sentiment:
The Gold/Silver ratio stood at 69.07, at the 74.6th percentile over 1 year and the 24.87th percentile over 3 years. A lower long-term percentile implies silver is relatively stronger versus gold, typically reflecting some recovery in industrial attributes. However, similarly, its direct mapping to Rebar is weak.
Crude Oil & Crack Spreads:
The Oil/Gold ratio was 0.0218, at a high of the 89.68th percentile over 1 year, showing oil prices are firm relative to gold. The crack spread was USD 66.75/bbl, indicating refining chain margins remain decent. Stable energy costs provide some support on the steel production cost side, preventing a spiral decline triggered by cost collapse, but they also cannot provide additional upward momentum.
FX & Rate Environment:
The US Dollar Index (DXY) stood at 102.21, with the US 10-year Treasury yield at 5.24%. A strong dollar and a high-rate environment are common enemies of global commodities. For CNY-denominated Rebar, although the FX factor affects mainly via imported raw material costs, the tightening of global liquidity will undoubtedly suppress speculative capital inflows into commodity markets. The VIX was 14.84, GVZ 22.79, and OVX 48.9, showing low equity volatility but relatively higher energy and precious metals volatility, reflecting a complex market sentiment.
Conclusion:
Taken together, cross-asset relative value shows that the global macro backdrop does not support aggressive long strategies. While a high Copper/Gold ratio hints at bright spots in industrial demand, they are concentrated in non-property sectors. For Rebar, which is deeply affected by the property cycle, the external environment offers neither significant bullish catalysts nor crash-style bearish shocks, but rather a “neutral-to-weak” overhang. Against this backdrop, reverting to China's fundamentals logic, selling into strength remains the higher-probability choice.
VI. Historical Statistics & Seasonality
From a seasonality standpoint, Rebar is currently at the tail end of the traditional “Golden September, Silver October” peak season. Based on the historical performance over the 20 trading days following the same date over the past 15 years, the average return was -0.43%, while the median decline was deeper at -1.27%. In the sample, only 6/15 years posted gains, a low win rate (about 40%). In extreme cases, the best year (2016) saw a sharp rally of +21.25%, while the worst year (2021) experienced a deep drawdown of -25.76%.
This data distribution reveals a typical asymmetric risk profile: although policy-driven stimulus can occasionally produce spike rebounds, in the absence of substantive demand support, the probability of prices seeking lower bottoms far exceeds that of an upside breakout. Combined with the weak supply-demand balance described in Section III, the current seasonal pattern further reinforces the bearish bias. Market participants should not pin hopes on a repeat of the 2016 short squeeze, but should instead guard against the risk of accelerated declines once the peak season thesis is invalidated.
VII. Scenario Analysis
Based on the aforementioned technical patterns, fund flows, and macro expectations, we set out the following three scenarios for RB2701 over the next two weeks:
Base Case (Probability 60%): Range-bound decline, testing prior lows.
Trigger: Price stalls below R1 (3094.33), with open interest holding steady or continuing to bleed slightly, with no significant build. With the release of the 10-14 CPI/PPI data, if inflation prints are muted or the PPI y/y decline widens, the market will confirm the weak domestic demand logic.
Target: First S1 (3065.33), then a further probe toward the 20-day low near 3060, or even lower to seek a new equilibrium.
Action: Sell into strength as the primary approach, watching the validity of resistance in the 3080-3090 zone.
Bull Case (Probability 25%): Technical repair, challenging above the pivot.
Trigger: Daily close effectively holds above R1 (3094.33), accompanied by a single-day sharp increase (>2%) in main contract open interest, indicating fresh long capital actively stepping in to absorb selling pressure. In addition, if the fixed-asset investment and real estate data released on 10-19 unexpectedly come in strong, that would also constitute a powerful driver.
Target: Move up to the prior platform high of 3112-3131.
Action: The original short strategy would then be invalidated; stop-loss and close immediately, and consider a light long to play a short-term oversold rebound.
Bear Case (Probability 15%): Breakdown acceleration, one-sided decline.
Trigger: A direct break below S1 (3065.33) with no rebound, alongside a major macro negative (such as a cliff-like drop in property sales or a contagion of international recession fears causing industrial indicators like the Copper/Gold ratio to weaken in tandem).
Target: Rapid probe to 3037 and below.
Action: Holders of short positions may lower their take-profit levels; aggressive traders may add on trend, strictly tracking the trendline.
VIII. Trading Strategies & Risk Management
For the baseline bearish scenario outlined above, we have devised the following standardized trading strategy:
Execution Plan:
Go short on RB2701 at an entry price of CNY 3,080/t; set the stop-loss at CNY 3,109/t; set the first target at CNY 3,037/t; holding period of 1–2 weeks; expected risk-reward ratio of 1:1.5.
Detailed Risk-Control Logic:
The stop-loss level of 3,109 is not set arbitrarily but is based on strict volatility constraints. The distance between this level and the entry price of 3,080 is CNY 29, which corresponds exactly to 1.03×ATR (current ATR14 is 28.286). This means that only when the price move exceeds twice the normal intraday noise range will it be judged as a trend-reversal signal, thereby avoiding being stopped out by normal market breathing. At the same time, 3,109 is also slightly above the key resistance R1 (3,094.33), providing an additional safety buffer.
Position Sizing:
According to the model calculation, the maximum single-trade risk exposure per lot is capped at CNY 320 (including estimated fees and slippage). For a capital size with a single-trade risk budget of CNY 66,920, the reference upper limit allows opening 209 lots. In actual execution, it is recommended that the initial position not exceed 50%–70% of this limit, i.e., around 100–150 lots, reserving ammunition for staged averaging down if the price moves adversely without hitting the hard stop, or for moderate pyramiding once the trend is confirmed. Never run a full position naked; ensure that account net-value drawdown remains controllable under any extreme market conditions.
IX. This Week's Data Calendar
This week's focus is on the dense release window for Chinese macroeconomic data. The specific schedule is as follows (all times Beijing time):
1. October 14, 09:30: Release of September CPI YoY and PPI YoY. This is a key indicator for testing whether China's deflationary pressure is easing, and it directly affects the valuation anchor of black-series commodities.
2. October 19, 09:30: Release of September new home price index MoM data.
3. October 19, 10:00: A cluster of major economic data releases, including fixed-asset investment YTD YoY, industrial value-added YoY, total retail sales of consumer goods YoY, services production index YoY, and real estate development investment YTD YoY.
Among these, the October 19 data package carries the most significant guidance for Rebar demand, particularly the fixed-asset investment and real-estate-related indicators. Traders should be highly vigilant against the risk of a sharp sell-off in the futures market should the data disappoint expectations.
This report is generated automatically from public quantitative and macro data for research and market tracking only. It does not constitute any investment advice.