Lower supply reduces China's rebar inventories for 2 weeks

SHANGHAI, Aug 23 (SMM) – China's inventories of rebar fell for the second straight week as of Thursday August 22 as production cuts on blast furnaces and electric arc furnaces (EAFs) were reflected in the spot market. 

Tangshan, Wu'an cities of China's top steelmaking province of Hebei intensified smog-control for the rest of August and a slew of steelmakers in Hubei province joined the effort to cut output amid losses and pessimistic outlook for local demand. These are set to boost rebar fundamentals and prices in the weeks ahead.

Overall demand, however, will pick up on expectations of smaller impact from bad weather. Potential transport regulation ahead of the National Day may accelerate the release of downstream demand at the end of August. 

Spot trades of rebar improved from a week ago as consumers feared stricter output controls in Tangshan and Wu’an will tighten supplies. Spot prices extended increases in some markets on the morning of Friday August 23, after they grew 10-30 yuan/mt on Thursday August 22. 

On the morning of August 23, spot rebar quotes by Jiangsu Shagang climbed 10 yuan/mt in Hangzhou, to stand at 3,740-3,760 yuan/mt, and quotes in Shanghai held steady at 3,670-3,690 yuan/mt. 

Spot prices could rally further as more environmental cutbacks are expected in the weeks ahead.

SMM data showed rebar inventories across social warehouses stood at 6.28 million mt as of Thursday August 22, down 0.7% on the week, after a decline of 0.6% a week ago.

Inventories across steel plants shrank 1.5% on the week to stand at 2.54 million mt, compared with a 1.2% drop a week earlier. 

Overall inventories of rebar, including stocks across steelmakers and social warehouses, slid 0.9% on the week and posted 8.82 million mt as of Thursday August 22, after they fell 0.7% in the prior week. On a yearly basis, inventories remained 43.9% higher