SMM Building Materials Inventory: Supply Stabilizes, Demand Continues to Recover, Inventory Reduction Persists

This week, the total national rebar inventory continued to destock, with a larger decline in wire rod inventory. The total rebar inventory decreased by 2.2% MoM, while the total wire rod inventory decreased by 8.06% MoM. This week, there was an increase in market news about production restrictions, and the annual production reduction has not yet been clearly implemented. Some steel mills announced upgrades to rolling lines, reducing construction steel production. The futures market saw a significant rally, and spot market prices and volumes both rose. The total inventory of construction steel continued to decline this week. This week, the total rebar inventory was 7.6427 million mt, a decrease of 171,900 mt MoM, a decline of 2.2% (previous value: -2.02%), and a decrease of 3.1523 million mt YoY compared to the same period last year, a decline of 29.2% (previous value: -31.26%). Table 1: Overview of Rebar Inventory Data source: SMM This week, the in-plant rebar inventory was 2.1102 million mt, a decrease of 95,000 mt MoM, a decline of 4.31% (previous value: -3.01%), and a decrease of 1.0537 million mt YoY compared to the same period last year, a decline of 33.3% (previous value: -36.36%). Steel mills maintained stable production rhythms, and prices rose. Both direct supply and market shipments increased slightly, leading to a continued decline in in-plant inventory this week. Chart-1: Trend of Rebar In-Plant Inventory, 2019-2024 Data source: SMM This week, the social rebar inventory was 5.5323 million mt, a decrease of 76,800 mt MoM, a decline of 1.37% (previous value: -1.62%), and a decrease of 2.0985 million mt YoY compared to the same period last year, a decline of 27.5% (previous value: -29.03%). After the spot price rose this week, it stabilized. During the price increase, market transactions were active, and social inventory continued to decline. Chart-2: Trend of Rebar Social Inventory, 2019-2024 Data source: SMM Looking ahead, some blast furnace steel mills in north-west and south-west China are currently underperforming, while blast furnace steel mills in other regions still maintain some profitability and continue normal production. EAF steel mills in central and east China have slightly reduced operating hours due to profitability and raw material procurement issues. As of March 25, the operating rate of SMM's 50 sample EAF steel mills was 39.68%, down 0.5% MoM. Overall, the production of construction materials is expected to remain stable. On the demand side, downstream end-user projects are affected by poor funding, and the recovery of demand intensity is lower than market expectations. The overall market sentiment remains cautious. During the spot price increase, merchants mainly focused on selling, limiting the upward potential. Looking ahead, the overall supply of construction steel is expected to remain stable, and although demand recovery is slow, it can still maintain the destocking pace. However, the destocking range is unlikely to expand significantly in the short term.