China steel rebar inventory shrank on week on continuous weak demand

SHANGHAI, Oct 16 (SMM) – Inventories of rebar across Chinese steelmakers and social warehouses stood at 10.6 million mt as of October 15, down 6.4% from a week ago and up 56.2% from a year earlier.

Rebar inventories depleted quicker on week, and the decline of total stocks in a single week hit a new high since the second half of this year. Restocking demand is rising post-holiday with the improvement of macro expectations. Combined with the introduction of production restriction policy for environmental protection in Tangshan, and the reduction of production and maintenance of some electric furnace plants due to inventory pressure during the holiday, the market sentiment has warmed up in an active futures market, and the end-user demand has surged, contributing to the sharp decline in rebar inventories this week.

Inventories at Chinese steelmakers fell 262,900 mt on the week and stood at 3.28 million mt, down 7.4% from a week ago and up 32.3% from a year ago.

Inventories at Chinese steelmakers fell sharply this week, and the year-on-year growth rate of inventories also dropped to about 30% due to the centralised release of restocking demand post-holiday and the active purchasing offend-users. On the other hand, rebar prices remained high due to improved sentiment on expectations to economic data and Tangshan's policy of limiting production. Merchants enthusiasm for purchasing have significantly improved after the long holidays, leading to decline of in-plant inventories.

Inventories at social warehouses fell 457,300 mt on the week and stood at 7.33 million mt, down 5.9% from a week ago and 69.9% higher from a year ago.

Capital pressure of end-user enterprises eased slightly in October, while steel demand is strong, as construction firms rush to complete their projects. SMM survey showed that 55.8% of construction and infrastructure enterprises planned to further increase steel products purchase in October. In addition, restocking demand across downstream enterprises is increasing post-holiday, which has accounted for the decline in rebar social inventories. The sharp decline in rebar inventories is due to not only the recovered rigid demand, but also increased market trade.

There is limited room for the decline of high output at present. The market shipment situation has shown obvious signs of cooling. In addition, the weather in some northern regions has turned cold, and demand is expected to weaken, the speed of stock depletion will slow down in the following weeks, with rebar inventories remaining at high levels.

Demand and the cost side may have some support for the prices in the high season, and the downward room of the prices is also limited. However, the current market equilibrium has been broken with the gradual weakening of demand, leading to a weaker outlook of rebar prices.