SHANGHAI, Jun 22 (SMM) – Spot prices of rebar will face downward pressure to recover this week as supply still firms at high levels and end-users demand has yet to shake off the impact of seasonality, which continues to weigh on market sentiment and deter shipments. Nonetheless, the spot prices will be underpinned on optimism that the recent outbreak of COVID-19 cases in Beijing is under control with a decline in confirmed cases in the city and on expectations of stepped-up purchases ahead of the three-day Dragon Boat Festival holiday.
Supply of construction steel rebar will unlikely decline in the near term as most steel mills maintain full operations in the chase of profits. SMM survey showed that China’s blast furnace steelmakers still saw rebar profits of 200-400 yuan/mt as of June 19.
The operating rates of 34 independent electric arc furnace (EAF) steel mills in China continued to edge lower last week, to 82.59% as of June 16, down 1.03 percentage point from June 12. The decline was primarily due to 3-4 days of maintenance at EAF mills in south-west China’s Sichuan province on issues around transformer stations. Other EAF steelmakers mostly held stable operation amid marginal profits or on the verge of losses.
Overall downstream demand will remain subdued this week on expectations of continuous rainy weather in most areas of east and south China. Seasonality will also prevent shipments from sellers to improve markedly.
Overall rebar inventories at steelmakers and social warehouses in China remained elevated, staying 24.1% higher from a year ago as of June 18. This grew market concerns about the strength in near-term demand, keeping traders from restocking amid cautious sentiment last week.
SMM data showed that overall inventories of steel rebar edged higher last week, the first weekly increase since late-March, as intensified seasonality issue slowed end-users purchases.