China rebar inventories stay lower on year

SHANGHAI, Dec 27 (SMM) – Inventories of construction steel rebar in China rose for a fourth consecutive week, at a faster pace, as of December 26, but overall stocks remained smaller on the year due to stronger-than-expected consumption in the fourth quarter, a SMM survey showed. 

Regular occurrence of environmental production curbs restricted the increase in rebar supply than the same period a year earlier, which also accounted for the lower stocks this year. 

On a weekly basis, meanwhile, intensified impact of a seasonal lull accelerated the buildup in inventories. 

With the clearing of cargo backlog at ports, rebar stocks across social warehouses rose at a faster rate than inventories at steelmakers this week. But the social stocks were lower than a year ago as limited winter restocking willingness by traders avoids a large inflow of cargoes from steel mills to social warehouses. 

While seasonality weighs on consumption, weakening steel prices will also remove part of the supply pressure in the short term. 

A SMM survey indicated that operating rates across electric arc furnace (EAF) steelmakers in China averaged 68% as of December 25, down 1 percentage point from the start of the month. The average rate hit a five-month high in early December.

Smaller profit margins also prompted some blast furnace steel mills to shift production to plate and coil products, at the expense of rebar. 

SMM does not see a significant deterioration in rebar fundamentals as prospects for more economic stimulus from Beijing continued to prop up rebar futures. Spot prices in North and East China are expected to stem their decline while prices in South China’s markets face downward risk. 

According to SMM data, rebar inventories at Chinese steelmakers stood at 2.12 million mt as of December 26, around five weeks prior to the Chinese New Year holiday. This was up 2.4% from December 19, compared to a 2% rise last week. 

Inventories across social warehouses advanced 7.2% on the week and stood at 3.04 million mt, accelerating from a buildup of 2.9% in the previous week. 

Overall inventories of rebar, including stocks across steelmakers and social warehouses, increased 5.2% and posted 5.16 million mt as of December 26, following after an increase of 2.5% in the prior week. 

On a yearly basis, overall inventories remained 4.4% lower as of December 26.