China steel rebar inventories extended sharp falls on week

SHANGHAI, Oct 22 (SMM)—China steel rebar inventories continued to fall sharply this week amid eased cash flow issues and release of demand. 

According to SMM data, rebar inventories across social warehouses stood at 6.9 million mt as of October 22. This was down 6% from a week ago, but up 73.6% from a year earlier.

Inventories at Chinese steelmakers shrank 3.3% on the week and stood at 3.17 million mt. This was up 26.7% year on year.

Overall inventories of rebar, including stocks across steelmakers and social warehouses, shrank 5.1% on the week and posted 10.07 million mt as of October 22.

On a yearly basis, overall inventories were 55.5% higher.

The decline in in-plant rebar inventories narrowed significantly this week. According to SMM surveys, operating rates at EAF mills stood at 82.48% as of October 20, up 2.87 percentage points on the week, while that at blast furnace mills were also high, standing at 88.28%, up 0.06 percentage point week on week. Meanwhile, rebar futures fluctuated range-bound this week amid mixed news, such as environmental restrictions and China’s third-quarter GDP, adding caution to market tone. Slightly higher output and fewer shipments from steelmakers to social warehouses led to the narrowed fall in in-plant inventories.

Social inventories continued to fall at a fast pace this week amid robust end-user demand. Construction sites stepped up operation after their tight cash flow issues eased. Some traders became more willing to sell as they were bearish on demand in winter. These accelerated depletion of social inventories.

Strong demand and slightly lower output caused by environmental restrictions are likely to underpin rebar prices. But demand will weaken as the weather turns colder. Besides, high inventories will also pressure prices.