SHANGHAI, Feb 5 (SMM) – China steel rebar inventories continued to accelerate increases this week as next week will enter the CNY holiday, the market has almost closed. Except the steel mills, most of the industry chain employees have left one after another.
Inventories of rebar across Chinese steelmakers and social warehouses stood at 9.99 million mt as of February 4, up 19.6% from a week ago. From the time dimension of the lunar calendar, stocks are up 40.6% from a year earlier.
According to SMM data, inventories at Chinese steelmakers rose 354,900 mt on the week and stood at 3.65 million mt. From the time dimension of the lunar calendar, stocks are up 10.8% from a week ago and up 54.1% from a year earlier.
In-plant inventories continued to post faster increase on week and the growth rate expanded 4.13 percentage points. The main reason was the shrinking demand and continuous production of steel mills. SMM learned that although operating rates of electric furnaces and blast furnaces continued to fall-operating rates of blast furnaces fell 0.6%, and operating rates of electric furnaces dropped significantly by 47.64% this week, the overall operating rates were higher than the same period last year, and the rebar output remained relatively high. In addition, the performance of raw materials this year is too strong, the production costs of steel mills are high with low profit, and the winter reserves are slightly higher than in previous years. This is also an important reason for the sharp increase in in-plant inventories year on year.
Inventories at social warehouses rose 928,200 mt on the week and stood at 5.06 million mt, up 22.48% from a week ago and 27.1% higher from a year ago. The growth rate expanded 5.99 percentage points. End-user demand stagnated and market merchants gradually left the market, leading to the continuous increase of social inventories.
The spot market for rebar has been basically confirmed before the holiday, and the national average prices remained at around 4,340 yuan/mt. Although the accumulation of inventories has accelerated and the spot fundamentals are under certain pressure, the support below for spot steel prices still exists, and prices still have upward momentum in the mid-to-long-term return after the CNY under the expectation of high costs and rapid economic recovery.