China steel rebar inventory continued to post faster increase on week

SHANGHAI, Jan 21 (SMM) – China steel rebar inventories continued to accelerate increases this week as downstream industries, especially real estate construction sites, gradually closed down before the Spring Festival with the expansion of the geographical scope of the domestic pandemic "recurrence", and end-user demand continued to shrink.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 7.22 million mt as of January 21, up 8.8% from a week ago. From the time dimension of the lunar calendar, stocks are up 28.8% from a year earlier. The growth rate expanded 2.92 percentage points.

According to SMM data, inventories at Chinese steelmakers rose 147,700 mt on the week and stood at 3.09 million mt. From the time dimension of the lunar calendar, stocks are up 5.02% from a week ago and up 42.1% from a year earlier.

In-plant stocks posted slower increase on week mainly due to the continuous reduction of supply side and the slow start of winter storage. On the one hand, the pandemic situation in Hebei has intensified, the transportation of raw materials in steel mills have been restricted and some steel mills have been forced to reduce production due to insufficient raw material stocks. Some steel mills without blast furnaces in East China and other places have also successively reduced production in preparation for suspension of work and holidays, causing steel mill output to continue to fall. On the other hand, the winter storage policy of steel mills was intensively introduced this week, and some merchants were more optimistic about steel prices after the holiday, restocking a little for winter storage, which accelerated the outflow of in-plant stocks.

Inventories at social warehouses rose 437,400 mt on the week and stood at 4.13 million mt, up 11.85% from a week ago and 20.5% higher from a year ago. Many merchants reported that end-user demand has been shrinking rapidly since January, and the shipment weakened sharply. However, in-plant stocks still maintained a relatively stable pace of delivery to social stocks. Especially this week, the winter storage of steel plants has gradually landed, and the rebar has not yet shown signs of weakness, some merchants started a small amount of winter storage operations, and their willingness to restock picked up slightly from last week.

Rebar inventories are posting faster increase, while the accumulation rate is relatively stable. The year-on-year growth rate from the time dimension of the lunar calendar has stabilised at a level of about 25%-30%, which is within market expectations, and the fundamental pressure has not been highlighted. In particular, the winter storage policy has basically been implemented. Under the high cost, steel mills have shown a strong willingness to hold prices and good expectations for post-holiday steel prices. The spot price does not have the motivation to drop sharply in the following weeks, and it is likely to keep a narrow fluctuation in the near term.