China steel rebar inventory increased as wet season impact lingered

SHANGHAI, Aug 14 (SMM) – Inventories of steel rebar across Chinese steelmakers and social warehouses stood at 11.6 million mt as of Aug 27, up 2.5% from a week ago and 32.9% from a year earlier.

Demand for rebar remains sluggish on the back of the wet season, and inventories of steel rebar this week piled up 0.5 percentage points faster than last week.

Inventories at Chinese steelmakers rose 2.7% or 141,500 mt on the week and stood at 3.66 million mt, up 4% from a week ago and 39.9% from a year ago.

Profits saw a rapid decline (as of August 27, the average rebar profit stood at just 73 yuan/mt based on iron ore prices of $125/mt, according to SMM calculations), rebar production rose slightly with sluggish end-users demand. Weak fundamentals suppressed market sentiment, dampening purchasing enthusiasm and curbing the decline of inventories of steel rebar.

Inventories at social warehouses rose 139,300 mt on the week and stood at 7.92 million mt, up 1.8% from a week ago and 30% higher from a year ago.

Over at Liaoning, Hebei, Chongqing which saw production disruptions amid the wet season and heavy floods, pace of construction has slowed down and demand weakened. In addition, end-users and traders are in the situation of "difficult to sell at high prices, difficult to buy at low prices” as market conditions remain volatile.

However demand is likely to improve in the following weeks. An SMM survey shows that the purchase volume will increase in September, according to 60% of the surveyed enterprises in construction and infrastructure sectors. Steel prices are likely to increase further on the back of stable supply, rising demand and strong cost support.