SHANGHAI, Dec 6 (SMM) – Inventories of construction steel rebar in China ended seven consecutive weeks of decline with a buildup of 4.3% in the week ended Thursday December 5, as profits continued to spur production and the impact of seasonality on demand intensified.
Steel plants still saw high profit margins due to the rally in spot rebar prices in the second half of November. This drove steelmakers that produce with blast furnaces to raise the output of rebar at the expense of other steel products, as rebar remain the most profitable in the market.
Operating rates across electric arc furnace (EAF) steelmakers also rose, to the highest since July at 69% as of December 4, a SMM survey showed.
Stepped-up production, together with arrivals from north China, saw southern Chinese markets under greater supply pressure.
Inventories of rebar at Chinese steel plants accelerated increase this week as cautious sentiment sidelined downstream consumers.
SMM expects consumption to further weaken and weigh on spot rebar fundamentals in the short term on the back of unfavourable weather and cash-flow burden at year-end.
According to SMM data, rebar inventories at steelmakers stood at 2.02 million mt as of December 5, around eight weeks prior to the Chinese New Year holiday. This was up 7.1% from November 28, compared to a drop of 1.6% last week.
Inventories across social warehouses climbed 2.4% on the week and stood at 2.73 million mt, reversing a decline of 2.1% in the previous week.
Overall inventories of rebar, including stocks across steelmakers and social warehouses, increased 4.3% and posted 4.74 million mt as of December 5, following after a decline of 1.9% in the prior week.
On a yearly basis, overall inventories remained 3.9% lower as of December 5.
