Finished Product Inventories of Galvanising Enterprises Increase Ahead of Chinese New Year: What Will Happen After the Holiday? [SMM Analysis]

SMM, January 10:

Finished Product Inventories of Galvanising Enterprises Increase Ahead of Chinese New Year; What About the Post-Holiday Situation? SMM Analyzes the Reasons as Follows:  

Ferrous metals are one of the main raw materials for galvanising enterprises. Since December, ferrous metals prices have continued to decline and fluctuated at low levels. As the Chinese New Year approaches, most end-users have ceased operations for the holiday, leading to a decrease in demand for galvanised pipes. Traders remain bearish on subsequent ferrous metals prices, and galvanised pipe traders are also refraining from stockpiling finished products. Consequently, the sales volume of galvanised pipe enterprises has dropped significantly. With demand falling short of expectations, some galvanising plants that had previously stockpiled raw materials are forced to continue production. Additionally, some enterprises are preparing for the Chinese New Year break by stockpiling, resulting in a noticeable increase in overall finished product inventories.

Regarding the operating rates of galvanising producers, the rates from January to September 2024 were generally slightly lower than the same period in previous years. Coupled with the poor performance of ferrous metals, enterprises were concerned about further price declines, keeping finished product inventories at low levels. However, demand unexpectedly improved significantly in November and December, leading to a sharp rebound in operating rates and a continued decline in finished product inventories. As demand weakened again, orders decreased, and enterprises maintained high operating rates, causing finished product inventories to gradually accumulate.

According to SMM, most enterprises remain pessimistic about post-holiday ferrous metals prices and are not planning to stockpile in large quantities. Finished product inventories are expected to decline post-holiday as consumption gradually improves.

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