SHANGHAI, Jan 3 (SMM) – Inventories of construction steel rebar in China rose for a fifth consecutive week as of January 2, in line with expectations as seasonally depressed demand grew rebar stocks at social warehouses and at steel mills. 

Limited winter stockpiling enthusiasm from major steelmakers kept traders on the sideline, which led to a significant year-on-year buildup in rebar inventories at steel plants, lifting overall rebar stocks higher than a year earlier for the first time since the second half of November. 

Social inventories of rebar also accelerated their increase with construction works drawing close to an end before the Chinese New Year and the cargo backlog at ports being cleared. 

Despite elevated stockpiles, the downside room in spot rebar prices will be capped on the prospects for weaker production and demand in the near term. 

The current gap in profit margins drove steelmakers more likely to produce hot-rolled coil at the expense of rebar. A SMM survey showed that profits of rebar at most steel producers stood 50-150 yuan/mt lower than that of hot-rolled coil, as of January 2. 

Smaller margins have pushed some electric arc furnace (EAF) steelmakers into suspension or maintenance, SMM learned. 

SMM expects the national average spot rebar prices to remain rangebound in a tight band, but prices in south China still faces downward pressure amid ongoing arrivals from the north. 

According to SMM data, rebar inventories at Chinese steelmakers stood at 2.17 million mt as of January 2, around four weeks prior to the Chinese New Year holiday. This was up 2.8% from December 26, compared to a 2.4% rise last week. 

Inventories across social warehouses advanced 12.8% on the week and stood at 3.43 million mt, accelerating from a buildup of 7.2% in the previous week. 

Overall inventories of rebar, including stocks across steelmakers and social warehouses, increased 8.7% and posted 5.6 million mt as of January 2, following after an increase of 5.2% in the prior week. 

On a yearly basis, overall inventories were 2.2% higher as of January 2, reversing a decline of 4.4% last week.