[SMM thread] inventory accumulation in section, post-section production or addition to further increase inventory pressure

This week, the country's total inventory of building materials was 13.905 million tons, a month-on-month rate of 7.6 percent, an increase of 62.7 percent over the same period last year.

National inventories of building materials continued to decline this week, slowing for the third consecutive week from a year earlier, indicating that building materials inventories are steadily approaching the same period last year. The month-on-month decline in inventories slowed down last week after expanding again this week, although the pre-festival terminal stock demand is not as expected, but the absolute volume is still high, is the main force driving this week's decline.

Table 1: thread inventory

Source: SMM

Table 2: comparison of thread inventory prices from 2018 to 2020

Note: due to the epidemic since 2020, due to the different opening time of the market, there is a certain error in the actual average spot price; from this week, the time dimension has been adjusted to the date of the Gregorian calendar.

Source: SMM

Specifically:

The inventory in the plant was 4.137 million tons, down 406000 tons from the previous month, or-8.9 percent from the previous month, an increase of 2.7 percent, or + 114.6 percent from the same period last year.

After slowing down last week, the rate of decline accelerated this week, mainly due to the demand for stock at the construction site, helping steel mills to increase the volume of orders for direct supply terminals. In addition, blast furnace output gradually accumulated throughout April, in the early high base growth slowed down, has lost to the digestion rate of demand, resulting in the expansion of the decline of the factory and warehouse. In addition, under the foreseeable pressure of the factory and warehouse, the blast furnace steel plant in the later stage has the power to accelerate the transfer of the finished material to the social warehouse, which has also led to the obvious decline of the factory storehouse this week.

Figure 1: trend of Thread Factory Library from 2016 to present

Source: SMM

Social inventory was 9.769 million tons, down 732000 tons from the previous month, or-7.0 percent from the previous month, an increase of 0.2 percentage points, or + 47.6 percent from the same period last year.

The decline in social libraries has expanded slightly this week, although there is a release of demand for pre-holiday stock, but on the one hand, the volume transferred by steel mills is relatively large, on the other hand, the trend of futures this week is weak, resulting in a more cautious terminal stock, suppressing part of the terminal stock demand, so the decline in social banking has not been significantly expanded.

Fig. 1: a list of the trend of thread social bank from 2016 to the present

Source: SMM

At present, although pre-festival replenishment promotes a significant decline in inventory, but during the holiday period, inventory will accumulate, superimposed post-festival production is expected to rise further, post-festival price or performance is weak.