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China steel rebar inventory up 0.5% on week amid decreasing apparent demand

iconJun 11, 2021 10:09
Source:SMM
Inventories of rebar across Chinese steelmakers and social warehouses stood at 10.27 million mt as of June 10, up 0.5% from a week ago. Stocks are up 5.7% from a year earlier.

SHANGHAI, Jun 11 (SMM) — Many places in the South officially entered the rainy season in the second week of June, and the impact of high temperature and rainy weather on downstream construction began to gradually manifest. Apparent demand of rebar fell 3.9% year on year, and the year-on-year decline expanded 2.6 percentage points from last week. The inflection point of the increase in China steel rebar inventory began to appear this week. In-plant stocks rose slightly, and the year-on-year growth rate expanded. The decrease of social stocks slowed down significantly. The inflection point of the increase in stocks is approaching. 

Inventories of rebar across Chinese steelmakers and social warehouses stood at 10.27 million mt as of June 10, up 0.5% from a week ago. Stocks are up 5.7% from a year earlier.

Inventories at Chinese steelmakers rose 57,300 mt on the week and stood at 3.15 million mt. Stocks are up 1.9% from a week ago and up 13% from a year earlier. 

With the arrival of rain and high temperature in the south this week, demand in some areas has begun to slow down. It coincides with the college entrance examination and the Dragon Boat Festival. After the college entrance examination effect was over, the end-user holiday restocking demand was partially released, and the transaction volume rebounded slightly. Therefore, social stocks continued to decrease while the rate of decline further narrowed. Inventories at social warehouses fell 9,300 mt on the week and stood at 7.12 million mt, down 0.13% from a week ago and 2.7% higher from a year ago. The year-on-year increase expanded 2.2 percentage points from the previous week. The inflection point of social stocks to increase is expected to be approaching.

In-plant stocks increased slightly, and social inventories decreased slightly this week. Total inventories has shown an upward turning point. The off-season effect is beginning to appear, the apparent demand declines faster, and it is expected that total stocks will begin to pile up.  

On the supply side, the large-scale production restriction policy is unlikely to be implemented in June, and the timing of the market reversal will be delayed. The supply side will mainly be driven by cost, with regional production restrictions, power curtailments and routine maintenance as the main focus, which will have little impact on the overall output. According to the SMM scheduled production survey, the planned output of mainstream steel rebar companies in June will drop by 0.08% from the previous month. Output is expected to decrease, while operating rates will remain relatively high.

On the supply side, the seasonal weakening trend of demand was obvious, while the rate of decline was relatively slow, and demand resilience was still strong in the near term. However, judging from the weak land acquisition data of real estate companies in May and the lower-than-expected issuance of special bonds, steel demand in the second half of the year is likely to be low.

Fundamentals are under bilateral pressure, with greater upward pressure and limited downward space, which is susceptible to news interference and market speculation.

It should be noted that on June 10th, a number of heavyweight leaders from the Central Bank, the Banking Regulatory Commission, the Insurance Regulatory Commission, and the Securities Regulatory Commission released blockbuster financial market information, including monetary policy, RMB exchange rate and financial derivatives, and international market risks. It is necessary to focus on preventing the impact of the risk of high-level correction in the international financial market on domestic finance, and be cautious about investment.

Inventory data
Rebar

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