Improved Weather Fuels Demand Release, Driving Further Decline in Construction Steel Inventory

Total building materials inventory decreased WoW, with total rebar inventory at 5.8586 million mt, down 2.70% WoW, and total wire rod inventory at 1.6565 million mt, down 0.42% WoW. Supply side, EAF steel mills are currently constrained by sluggish market conditions and high cost pressure, with some electric furnace mills reducing operating hours. Blast furnace steel mills' profit margins for producing rebar are lower than those for sheet and coil products. Subsequently, some steel mills will adjust their production strategies, shifting hot metal supply toward specialty products, further indicating a contraction in supply. Demand side, current demand performance varies by region. In south China, favorable weather conditions have ushered in the peak construction season, providing some support for demand. North China is about to fully enter the heating season, with some areas accelerating project progress, leading to a short-term release in demand. Some regions in the southwest are stimulating demand through price reductions and volume sales, also providing a certain boost to overall demand. Therefore, although overall demand remains weak, regional differentiation has led to some improvement compared to earlier periods. Under these combined effects, building materials inventory decreased WoW.

Total rebar inventory this week was 5.8586 million mt, down 162,400 mt WoW, a decrease of 2.7% WoW (previous: -2.65%), up 1.8005 million mt compared to the same lunar period last year, an increase of 44.37% (previous: 51.36%).

Rebel inventory at steel mills this week was 1.8841 million mt, down 1,500 mt WoW, a decrease of 0.08% (previous: -4.10%), up 332,400 mt YoY, an increase of 21.42% (previous: 31.73%). Building materials supply changed relatively little this week, but demand side, influenced by improved weather conditions, project progress accelerated slightly. Direct deliveries to construction sites were moderate, but traders remained cautious, with relatively low enthusiasm for cargo pick-up. As a result, the reduction in building materials inventory at mills was not significant this week.

Rebar social inventory this week was 3.9745 million mt, down 160,900 mt WoW, a decrease of 3.89% (previous: -1.98%), up 1.4681 million mt YoY, an increase of 58.57% (previous: 62.4%). With reduced weather impact this week, market procurement demand for rebar showed marginal improvement. Coupled with futures fluctuating upward WoW, market sentiment received a boost. Consequently, transactions for low-priced spot rebar resources improved, leading to a slight decline in rebar social inventory this week. Overall, the traditional construction peak season of "September-October peak season" has entered its final stage. Construction pace in south China remains stable, while the demand for rushing to meet deadlines in north China is expected to continue. However, some construction projects still face practical challenges such as slow fund allocation and hindered implementation of construction plans. End-user procurement is mainly based on "restocking as needed," with insufficient willingness for large-scale concentrated procurement, which constrains the intensity of demand release. Therefore, against the backdrop of limited demand release intensity and relatively steady resource replenishment pace, total inventory is expected to continue declining next week, but the rate of decline is unlikely to increase significantly. Subsequent attention should focus on changes from a macro perspective.