[SMM Building Materials Inventory] Weak Supply and Demand Lead to a Stalemate; When Will the "Marathon" of Inventory Depletion Reach Its End?

This week, the total inventory of construction steel continued to decline. The total rebar inventory stood at 5.0998 million mt, with a WoW decline of 0.91%. The total wire rod inventory was 1.1008 million mt, showing a WoW increase of 1.61%. On the supply side, blast furnace steel mills had considerable profit margins and mostly maintained their previous production levels. Some steel mills had good order-taking situations for their product varieties, and their profit performance was stronger than that of rebar, leading to a slight shift of pig iron towards these product varieties. EAF steel mills still faced difficulties in collecting scrap and suffered from profit losses, maintaining low operating hours. Overall, the supply pressure eased slightly. On the demand side, the impact of Typhoon "Danasi" combined with an increase in high-temperature and rainy weather restricted construction progress at downstream construction sites in many regions. The market was in the traditional off-season for demand, with terminal downstream purchases mainly driven by immediate needs, and overall demand fluctuated little compared to the previous period. In summary, this week's fundamentals showed that the supply reduction slightly exceeded the demand reduction, and the inventory of construction steel continued to decline.

This week, the total rebar inventory was 5.0998 million mt, a decrease of 46,900 mt WoW, representing a decline of -0.91% (previous value: -0.39%). Compared to the same period of the lunar calendar last year, it decreased by 2.0712 million mt, with a decline of 28.88% (previous value: -29.04%).

Table 1: Overview of Rebar Inventory

Data source: SMM

This week, the in-plant inventory of rebar was 1.8345 million mt, an increase of 2,200 mt WoW, representing a growth of 0.12% (previous value: -2.58%). Compared to the same period last year, it decreased by 82,500 mt, with a decline of 4.30% (previous value: -5.66%). The impact of positive news such as "anti-cut-throat competition" faded, and a strong wait-and-see sentiment prevailed. Agents were not enthusiastic about purchasing, leading to a slight accumulation of inventory at construction material factories.

Chart-1: Overview of Rebar Inventory Trends at Steel Mills from 2020 to 2025

Data source: SMM

This week, the social inventory of rebar was 3.2653 million mt, a decrease of 49,100 mt WoW, representing a decline of 1.48% (previous value: 0.87%). Compared to the same period last year, it decreased by 1.9887 million mt, with a YoY decline of 37.85% (previous value: -37.59%). Recently, agents have been cautious about the future market trend, adopting a low-inventory strategy. This week, the market arrivals decreased. Meanwhile, Typhoon "Danasi" brought heavy rainfall, continuously affecting south China, and the muggy weather increased in north China, slowing down construction progress at sites. The market was in the traditional off-season for demand, with weak purchasing enthusiasm from terminals and low willingness to stockpile. Overall, the social inventory of construction materials shifted from an increase to a decrease.

Chart-2: Overview of Rebar Social Inventory Trends from 2021 to 2025

Data source: SMM

Looking ahead, on the supply side, there is currently a continuous divergence in profits between blast furnace and EAF steel mills. Most blast furnace steel mills have production profit margins exceeding 100 yuan per ton, showing strong production willingness. EAF steel mills, however, face poor profit conditions and difficulties in collecting scrap, with electric furnaces mostly maintaining production during off-peak electricity hours. Overall, supply may remain stable. Demand side, in the short term, the high temperatures in the north and the rainy weather in south China will persist, potentially continuing to affect the progress of downstream construction projects. Terminal purchases will primarily be driven by immediate needs, and the apparent consumption of building materials will remain at a low level. Overall, it is difficult to see significant changes in the short-term supply and demand fundamentals, and it is expected that the fluctuation range of total inventory will be relatively small next week.