Declines in rebar inventories narrowed on weakened consumption

SHANGHAI, Nov 29 (SMM) – Inventories of construction steel rebar in China remained lower from a year ago, but the week-on-week decline slowed as of November 28 as unfavourable weather significantly dampened demand and higher spot prices sidelined consumers. 

A new round of cold wave hit north China this week. This, together with greater rainfalls in the south, deterred the release of downstream demand. 

Rising spot prices made downstream consumers and traders cautious about stockpiling. SMM assessments indicated that average prices of spot rebar in China climbed 399 yuan/mt from November 11 to 25. Prices started to pull back on November 26, losing an average 61.7 yuan/mt as of November 28, as transactions cooled. 

The pace of declines in rebar stocks across social warehouses also lose some steam as a continued shortage of some specifications drove traders to hold cargoes back from the market. Insufficient supplies were unable to meet downstream demand and this also slowed the slide in social stocks. 

Steelmakers, meanwhile, were keen to clear inventories due to cash-in inclination at year-end. Greater proportions of cargoes from steel mills were delivered directly to downstream consumers. 

This week, Tangshan and Handan in China’s major steelmaking hub of Hebei province reactivated smog alerts for heavy air pollution, which affected production at local steel mills and weighed on the in-plant rebar inventories on the week. 

SMM sees greater downward potential in near-term prices of spot rebar as the impact from seasonality on demand intensifies and profits continue to boost production. 

However, current low inventories of spot materials and a lingering shortage of some products will cap the downside room in prices.  

According to SMM data, rebar inventories at steelmakers stood at 1.88 million mt as of November 28, around nine weeks prior to the Chinese New Year holiday. This was down 1.6% from November 21, smaller than a drop of 7.2% last week. 

Inventories across social warehouses declined 2.1% on the week and stood at 2.66 million mt, following a 10.2% drop in the previous week. 

Overall inventories of rebar, including stocks across steelmakers and social warehouses, slid 1.9% and posted 4.55 million mt as of November 28, slowing from a decline of 9% in the prior week. 

On a yearly basis, overall inventories remained 4.6% lower as of November 28.