Pre-holiday buying speeds up declines in China's rebar inventories

SHANGHAI, Sep 27 (SMM) – The weekly decline in China's social inventories of construction steel rebar as of September 26 was more than double that in the previous week, as downstream constructions sites stepped up stockpiling before the National Day holiday.  

The pre-holiday stricter anti-smog campaign in Beijing, Tianjin, and Hebei caused limited impact on construction works as only operations related to dust pollution were controlled. 

Rebar inventories across steelmakers, however, rose for the second straight week as of September 26, indicating growing supplies. Lower feedstock costs and stronger steel prices improved margins at steel mills and boosted production. 

SMM assessed that the average prices of spot iron ore stood at 646 yuan/mt in the month to September 26, down from the average 870 yuan/mt in July, though slightly higher from August’s 637 yuan/mt. 

The average spot prices of rebar in China have surged 112 yuan/mt so far in September, exceeding the increase in that of raw material steel scrap. 

An SMM survey showed that the operating rates across electric arc furnace (EAF) steelmakers climbed 3 percentage points on the month to 59% in the second half of September. 

It remains noteworthy that higher supplies amid the actual weaker-than-expected impact of environmental curbs and high production enthusiasm at steelmakers could pose potential pressure on near-term rebar prices. 

SMM data showed that rebar inventories across social warehouses stood at 4.81 million mt as of Thursday September 26, down 8.7% on the week, after they fell 4.2% a week ago.

Inventories across steel plants grew 0.4% on the week to stand at 2.21 million mt, compared with a 0.2% rise a week earlier.

Overall inventories of rebar, including stocks across steelmakers and social warehouses, slid 6% and posted 7.02 million mt as of Thursday September 26, accelerating from a decline of 2.9% in the prior week. 

On a yearly basis, overall inventories remained 14.8% higher as of September 26.