China steel rebar inventory continued to post faster increase on week amid shrinking demand

SHANGHAI, Jan 15 (SMM) – China steel rebar inventories continued to accelerate increases this week amid pandemic and cold weather.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 6.63 million mt as of January 14, up 5.9% from a week ago. From the time dimension of the lunar calendar, stocks are up 28.7% from a year earlier.

According to SMM data, inventories at Chinese steelmakers rose 165,000 mt on the week and stood at 2.94 million mt. From the time dimension of the lunar calendar, stocks are up 5.94% from a week ago and up 39% from a year earlier.

In-plant stocks posted faster increase on week. On the one hand, steel mill output continued to decline. According to an SMM survey, as of January 14, the affected volume of long steel caused by the steel plant maintenance stood at 1.2 million tons, up 79,800 mt from December. Meanwhile, operating rates of billet plants and electric furnace plants continued to decline due to electricity restrictions and profits (SMM data showed that operating rates of electric furnaces fell 1.21 percentage points on week, and operating rates of billet plants fell 6.4 percentage points from the previous month). On the other hand, end-user demand continues to weaken, and with the approaching winter storage, the absolute market prices are still high, and merchants are less willing to restock, which drags down the decline in in-plant stocks.

Inventories at social warehouses rose 204,300 mt on the week and stood at 3.69 million mt, up 5.86% from a week ago and 21.5% higher from a year ago.

Social stocks are still accumulating despite the shrinking demand, but the accumulation speed has slowed down. The main reason is that the transfer efficiency of in-plant stocks to social stocks has decreased. The willingness to ship the goods and reduce the stocks is strong due to the cautious sentiment about the later prices before the Chinese New Year.

The current outbreak area of the pandemic is expanding slightly. Although the pandemic in Hebei has been slowly controlled, it has still aroused the attention and concerns of all sectors of the market. Shandong Jining and other places have successively announced the shutdown of construction sites in mid-January.

Demand is shrinking at an accelerating rate under the dual impact of the pandemic and cold weather. Rebar inventories will continue to accelerate increases, and the downward trend of rebar prices has not yet ended. However, it is understood that under the firm raw material prices, steel mills have made little profit. Steel mills in North China and other regions have even entered a state of loss of 100-200 yuan/mt. They are very willing to support prices, so the downside space is likely to be limited.