China rebar inventories rose at slower pace on falling production

SHANGHAI, Feb 25 (SMM) – China’s inventories of construction steel rebar extended their buildup in the week ended February 20, but the increase slowed from a week earlier on the back of falling production. 

Construction remains one of the downstream sectors that resume operations at the slowest pace after the coronavirus impact faded. Major projects in Hunan, Guangdong, Guizhou and Zhejiang have restarted construction. Cash-in inclination drove some traders to sell off cargoes, but the resumption of overall demand was limited. 

The accumulation of rebar inventories at steelmakers slowed as expanded losses triggered production cut and maintenance. Greater scale of maintenance is in the pipeline as some steelmakers face cash flow issues amid sluggish trades. 

Rebar production is on a downward trend since the beginning of 2020, falling to low levels since October 2018 when SMM rebar production data was fist launched. 

Last week, the gradual recovery of logistics facilitated the shipment of cargoes from steel plants to social warehouses. Most traders reported normal deliveries from steel producers. 

SMM expects the current pace of demand recovery unlikely to reverse the upward trend in rebar inventories in the short term. This may continue to see rebar inventories rising further this week with spot prices hovering weakly. 

According to SMM data, rebar inventories at Chinese steelmakers stood at 7.09 million mt as of February 20. This was up 14.2% from February 13, compared to a 22.7% rise last week. 

Inventories across social warehouses advanced 14% on the week and stood at 11.06 million mt, with the rise slowing from a buildup of 15.9% in the previous week.

Overall inventories of rebar, including stocks across steelmakers and social warehouses, increased 14.1% and posted 18.15 million mt as of February 20, after an increase of 18.5% in the prior week. 

On a yearly basis, overall inventories were 33.1% higher as of February 20, following a buildup of 21.1% last week.