SHANGHAI, Oct 29 (SMM) – Some domestic steel mills have resumed the production this week, and the power rationing in east and south China has eased. The rebar output increased by 6.5% on the week.
The futures prices of the ferrous metals plunged across the board under the governmental curb, significantly dragging down the rebar spot prices. Many merchants cut the prices sharply for the shipments with panic. The transaction was brisk as the downstream users were willing to purchase. The apparent demand rose by 4.3% this week.
The inventory of rebar across Chinese steel makers and social warehouses stood at 7.94 million mt as of October 28, down 138,800 mt or 1.7% from a week earlier. Stocks are down 1.37 million mt or 14.7% from a year earlier.
The inventory at Chinese steel makers increased 170,400 mt or 6.9% from a week earlier to 2.63 million mt. And stocks are 361,000 mt or 12.1% lower than the same period last year.
Some steel mills have resumed the production this week, and the traders were reluctant to purchase amid the plummeting spot prices. The increment in the in-plant inventory expanded on the week. Some second and third-tier steel mills in east China vigorously resumed production, and the spot prices fell by 350-450 yuan/mt on the week. The purchase of small orders was low, so the in-plant inventory in east China increased. The power rationing eased in south China, where the steel mills are basically producing at the full capacities, leading to a significant increase in the in-plant inventory. The production restrictions further intensified in Shanxi, Hebei, and other regions in north China, where the rebar output dropped slightly. However, the rapidly falling prices strengthened the wait-and-see sentiment, and the in-plant inventory increased slightly.
The decline in the social inventory expanded on the week, mainly due to the sharp drop in the spot prices. The end users were more willing to purchase at lower prices. The social inventory fell most significantly in east China, as some sites were ramping up the construction near the end of the peak season, and they accelerated the purchase. The social inventory in south-west China also fell markedly amid the expedited production. Some sites in north China also sped up the construction before the Winter Olympics, where the social inventory of rebar fell slightly. The rebar supply in south China increased significantly, and the social inventory rose slightly.
The inventory at social warehouses declined 309,300 mt or 5.5% on the week and stood at 5.31 million mt, down 1.01 million mt or 16% from a year ago.
Although the production restrictions on the supply side have eased, the plunging spot prices have squeezed the profits of the steel mills, and the output increment is expected to be limited. According to SMM survey, the real estate companies in many regions need to ramp up the construction in November, so they may accelerate the purchase. The total rebar inventory across the country is expected to keep falling, but the decline may not be rapid amid the weak supply and demand.
