China steel rebar inventory shrank 3.5% on week on continuous end-user rigid demand

SHANGHAI, Dec 24 (SMM) – China steel rebar inventories continued to decline this week due to continuous end-user rigid demand. Market speculative demand has also been released to some extent with the sharp change of rebar prices.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 5.77 million mt as of December 24, down 3.5% from a week ago. From the time dimension of the lunar calendar, stocks are up 20.7% from a year earlier.

According to SMM data, inventories at Chinese steelmakers fell 128,300 mt on the week and stood at 2.48 million mt. From the time dimension of the lunar calendar, stocks are down 4.9% from a week ago and up 22.7% from a year earlier.

In-plant stocks still posted faster decline this week. Rebar output continues to decline. The impact of electricity consumption restrictions continued. Operating rates of electric arc furnace steel plants continued to decline by 1.52 percentage points this week, and the maintenance of blast furnace plants showed no signs of concentrated resumption of production. In addition, demand performed well. Construction on construction sites in South China, East China and even the Beijing-Tianjin-Hebei region is still relatively normal, and there is still a certain demand for completing the work in South China and East China. Rebar prices rose sharply at the beginning of this week amid active trade. The willingness of merchants to restock significantly improved, which also accounted for the decline of in-plant stocks.

Inventories at social warehouses fell 81,000 mt on the week and stood at 3.25 million mt, down 2.4% from a week ago and 19.3% higher from a year ago.

The decline of social stocks continued to slow down. The overall demand was continuous. From the perspective of the demand structure, small and medium-sized construction sites in various regions have gradually entered a state of capping and closing after the early rush work before year-end under the urging of factors such as the explosion of the pandemic in certain cities. However, such phenomena in large-scale projects are not prominent. Considering that the procurement channels of construction sites of different scales are not the same, the contribution of the end-user rigid demand to the decline of social inventories is slightly weaker than in the previous period. Although the market trading atmosphere is fair in the near term, a considerable part of it comes from market speculative demand, which is not beneficial to the digestion of actual inventories.

The demand for completing the work in East China and South China markets continued, and the production status of steel mills without blast furnaces (especially with electric furnaces) and blast furnace plants tends to be stable in the near term. The inventory decline is likely to continue to slow down. Spot prices still have support. However, demand is sure to seasonally weaken in the following weeks with the tortured market mentality under the choppy market for rebar. Market fears of high prices continued to ferment due to excessively high absolute prices, which are also constantly squeezing the upward space of spot prices and will increase the downside risk of the prices in the later January.