China steel rebar inventories declined on week for the first time post-holiday

SHANGHAI, Mar 20 (SMM) – Inventories of steel rebar across Chinese steelmakers and social warehouses fell in the week ended March 19, the first weekly decline since the Chinese New Year holiday, on the back of steady resumption of downstream demand as the coronavirus has been more contained domestically. 

Construction sites ramped up operations, which coupled with bullish prospects for near-term demand from the infrastructure sector, drove consumers to stockpile, which has frontloaded some consumption. 

Steel mills slowed their shipments to social warehouses as their inventory pressure eased, and this quicken the slide in social stocks this week. The return of downstream demand significantly relieved the inventory burden at steel plants that directly supply to consumers. 

However, the turning point in the trend of overall rebar inventories will unlikely point to reduced supply pressure or a rally in spot rebar prices in the near term, as the stocks remain considerably higher on the year and optimistic outlook for infrastructure construction has seen some demand frontloading. 

Rebar supply is likely to resume in a faster pace than demand, as electric arc furnace (EAF) steelmakers have hiked their operating rates to 20.3% from 7.58% in early March and the profits of rebar have surpassed that of hot-rolled coil. In addition, potential great amounts of invisible inventories could also add to supply pressure. 

A SMM survey showed that the overall rate of resumption for construction work in China stood only at 40-50% as of March 19, while the rates in east and south China were buoyant. 

According to SMM data, rebar inventories at Chinese steelmakers stood at 6.73 million mt as of March 19. This was down 10.8% from March 12, compared to a 2.1% decline last week. 

Inventories across social warehouses shrank 1% on the week and stood at 13.79 million mt, reversing a rise of 5.1% in the previous week.

Overall inventories of rebar, including stocks across steelmakers and social warehouses, fell 4.4% and posted 20.52 million mt as of March 19, after an increase of 2.5% in the prior week. 

On a yearly basis, overall inventories were 84.6% higher as of March 19, following a buildup of 83.1% last week.