SHANGHAI, Jun 19 (SMM) – Inventories of steel rebar across Chinese steelmakers and social warehouses edged higher this week, the first weekly increase since late-March, as intensified seasonality issue dampened end-users demand and depressed market sentiment.
Rebar inventories across social warehouses extended a downward trend, as purchases by some end-users continued amid stepped-up construction after the coronavirus impact. However, the decline this week narrowed significantly from a week ago as torrential rainfall in expanded areas that cover Shaanxi and Henan, for instance, deterred operations at local construction sites and slowed their purchases.
Stocks at steel mills expanded for the second consecutive week as of June 18, driven by slower shipments from steel plants to social warehouses in a rainy season and high production at steelmakers. Steel mills in various regions in China remained encouraged to keep high operating rates, given gross profits of 200-500 yuan/mt, an SMM survey showed as of June 18.
Recent weakness in spot and futures prices of rebar grew market participants’ concerns about the strength of near-term demand and elevated inventories. This also reduced purchases by downstream consumers and triggered a buildup in in-plant inventories.
SMM expects high supply and continued rainy weather to continue to weigh on downstream consumption and prevent rebar inventories from falling markedly in the near term.
Spot prices of rebar, however, will be underpinned as current consumption still outperforms that of the same period last year and the year-on-year increases in overall stocks further narrowed.
According to SMM data, rebar inventories across social warehouses stood at 6.84 million mt as of June 18. This was down 1.2%, or 85,900 mt, from June 11, slowing from a decline of 164,600 mt, or 2.3% last week.
Inventories at Chinese steelmakers edged up 6.2% on the week and stood at 2.96 million mt, after the stocks rising 0.4% in the previous week.
Overall inventories of rebar, including stocks across steelmakers and social warehouses, grew 0.9% and posted 9.81 million mt as of June 18, after a decline of 1.6% in the prior week.
On a yearly basis, overall inventories were 24.1% higher as of June 18, following a buildup of 24.7% last week.
