China steel rebar inventory rose 3.9% on week

SHANGHAI, Dec 31 (SMM) – China steel rebar inventories started to increase this week.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 5.95 million mt as of December 31, up 3.9% from a week ago. From the time dimension of the lunar calendar, stocks are up 24.5% from a year earlier. The stock increasing time of rebar finally arrived last week at low prices amid cold weather.

According to SMM data, inventories at Chinese steelmakers rose 214,600 mt on the week and stood at 2.69 million mt. From the time dimension of the lunar calendar, stocks are up 8.7% from a week ago and up 32.8% from a year earlier.

In-plant stocks started to pile up this week. The willingness of market merchants to restock continued to be weak at the beginning of last week. End-user demand is gradually shrinking due to increased seasonal interference. At the same time, some markets have limited transportation due to cold waves, pandemics and other reasons, which has also accelerated the accumulation of in-plant inventories.

Inventories at social warehouses rose 8,800 mt on the week and stood at 3.26 million mt, up 0.3% from a week ago and 18.4% higher from a year ago. Social stocks also began to accumulate this week. However, although the overall rigid demand shrank as the weather turned colder, while the transmission process from the in-plant stocks to social stocks was blocked, the New Year's Day holiday is approaching, and the end-user restocking pace is relatively faster. Therefore, social stocks posted smaller increase than in-plant inventories.

The rebar spot fundamentals have weakened. On the supply side, the impact of the electricity consumption restrictions in January has disappeared, and the output of electric furnace plants is likely to recover quickly under high profits. On the demand side, the interference of seasonal factors is increasing, and inventories have also started to pile up. However, demand resilience in East China and South China is still relatively strong for the time being.

Some construction sites in Shandong, Henan and other regions where construction was stagnated due to environmental protection controls will resume construction in January. The overall demand is still sustainable. In addition, the profit of steel mills has shrunk on strong raw material end, and the willingness to hold up prices is strong, which will also form a certain support for steel prices. Therefore, the overall rebar prices in January are likely to fluctuate weakly, but the bottom support is firm and there is not much downside space in the near term (post-holiday). There is a short-tempo rebound opportunity for the spot even under the high prices of steel mills.