China steel rebar inventory shrank slower than expectations on restocking demand

SHANGHAI, Sep 25 (SMM) – Inventories of rebar across Chinese steelmakers and social warehouses stood at 11.2 million mt as of Sep 25, down 1.5% from a week ago and up 59.1% from a year earlier.

Rebar inventories shrank slower than expectations on restocking demand before the National Day holidays, and rate of decline of rebar inventories is only 7.2 percentage points greater as compared to last week.

Inventories at Chinese steelmakers fell 25,200 mt on the week and stood at 3.33 million mt, down 0.7% from a week ago and up 50.6% from a year ago.

Inventories at Chinese steelmakers continued to drop slowly this week. Some steelmakers resumed production from maintenance, leading to a slight increase in operating rates of blast furnaces (BFs) and electric furnaces and a slight increase in rebar output this week.

The continuous decline of futures and the rush of spot future resources out of the market has weighed on market sentiment. Steelmakers are hoping to reduce their inventories ahead of the week long National Day holidays. Inventories at Chinese steelmakers shrank slower than expectations before the National Day holidays as they are unwilling to restock.

Inventories at social warehouses fell 148,500 mt on the week and stood at 7.84 million mt, down 1.9% from a week ago and 63.1% higher from a year ago.

Demand for restocking has improved ahead of the National Day holidays, leading to a faster decline in inventories at social warehouses. However, the pace of downstream purchase on demand has resulted in a weaker overall end-user demand due to the tighter capital flow at mills.

Under high output of the rebar, the effect of traditional peak season and the demand of pre-holiday restocking has failed to deplete inventories ahead of the long holidays. Although rebar prices have the momentum to rebound in the near term due to the two-week decline of the futures market, the downward trend of rebar prices in the later period has been formed.