SHANGHAI, Feb 26 (SMM) – China steel rebar inventories slowed down the increase on week as the domestic market was in a state of complete stagnation in the same period last year, while the market demand recovered relatively quickly this year.

Inventories of rebar across Chinese steelmakers and social warehouses stood at 16.28 million mt as of February 25, up 16.1% from a week ago. From the time dimension of the lunar calendar, stocks are up 2.3% from a year earlier. China steel rebar inventory continued to pile up sharply as end-user steel demand has not yet fully recovered. 

According to SMM data on February 25, inventories at Chinese steelmakers rose 75,900 mt on the week and stood at 5.24 million mt. From the time dimension of the lunar calendar, stocks are up 1.5% from a week ago and down 15.5% from a year earlier.

Steel mills without blast furnaces resumed work and production one after another this week. In-plant stocks continued to accumulate, while the growth rate narrowed significantly by 40%.

Rebar profit was low, and the output growth rate was not obvious. While the prices of finished products were rising rapidly, the cost, especially the prices of iron ore, increased simultaneously, and the profitability of steel mills was still low. According to the calculation of SMM data model, the profit of integrated steel mills producing rebar stood at 25 yuan/mt (calculated at ore prices of $175.6) It was less profitable than other steel products such as coils at 114 yuan, and steel mills were less willing to produce rebar. Steel mills without blast furnaces are mostly focused on resuming work and production next week, and the increase in output this week is not obvious.

In addition, the speculative sentiment is hot, and the recovery rate of end-user demand is relatively fast. Rebar contracts rose across the board and showed large fluctuations post-holiday. Bullish sentiment continued to be released, and some merchants wanted to restock, which accelerated the transfer efficiency of in-plant stocks to social stocks. At the same time, the recovery efficiency of end-user demand this year was faster than in previous years, which also played a positive role in the digestion of in-plant stocks.

Inventories at social warehouses rose 2.18 million mt on the week and stood at 11.04 million mt, up 24.6% from a week ago and 13.8% higher from a year ago.

The week-on week growth rate of social stocks narrowed15.2 percentage points this week due to the continuous recovery of end-user demand. However, the YoY growth rate increased by 7 percentage points, mainly due to the stagnation of transportation under the pandemic in the same period last year, the interruption of transmission from in-plant stocks to social stocks, and the slow accumulation of social stocks.

As electric arc furnace steel mills and billet steel mills will resume work and production next week, output will continue to rise at a high speed. On the other hand, according to an SMM survey, construction sites will also be intensively started next week. Under the double increase of supply and demand, rebar inventory is likely to continue to post slower increase. It is even likely to decrease year on year. 

In the process of demand recovery, the spot prices of rebar will also have momentum to rise along with the active market trading sentiment.