Rebar fundamentals remain bullish despite higher inventories post-holiday

SHANGHAI, Oct 12 (SMM) – China's overall inventories of construction steel rebar ended their seven straight weeks of slide and rose 5.3% in the week of Thursday October 10, as trades halted in the week-long National Day holiday and as steel mills ramped up supplies after output controls were lifted. 

Downstream consumers procured cautiously after returning from the holiday. This, coupled with non-fully recovered transportation after the holiday, also helped drive up social inventories. 

However, the weekly buildup in stocks across social warehouses, standing at 57,700 mt, was unexpectedly far below a rise of 195,600 mt during the same week after the 2018 National Day holiday, indicating relatively solid demand this year. 

SMM remains bullish about rebar fundamentals and prices in the upcoming two weeks as a new round of production curbs for the autumn/winter heating season set in. This will prevent supply from expanding significantly despite improved margins at mills. 

Most steel mills in China’s major steelmaking hub of Tangshan will face capacity cuts of 20%-55% this month, according to a smog-control plan released on October 9. Production at electric arc furnace steelmakers will also be capped by a tightened up scrap market. 

SMM data showed that rebar inventories across social warehouses stood at 4.86 million mt as of Thursday October 10, up 1.2% from September 26. Inventories across steel plants grew 14.1% to stand at 2.53 million mt.

Overall inventories of rebar, including stocks across steelmakers and social warehouses, advanced 5.3% and posted 7.39 million mt as of Thursday October 10, following a decline of 6% in the week of September 26. 

On a yearly basis, overall inventories were 15.6% higher as of October 10.