China rebar inventories extended rise amid thin trades
Inventories of construction steel rebar in China have increased for seven straight weeks as construction demand dwindled two weeks prior to the Chinese New Year holiday, even as rebar production shrank to the lowest level this year amid falling profits.
Transactions in the spot rebar market were close to stagnant as traders exited the market for holidays. There were only a few traders that continued their winter stockpiling. This saw social inventories of rebar accelerating the increase last week.
The buildup in rebar stocks at steel mills was faster than a year earlier as cautious prospects for post-holiday prices and a lack of preferential policies for winter stockpiling deterred buyers from purchasing.
On the supply side, lower profit margins depressed production at blast furnace steelmakers and losses drove electrical arc furnace (EAF) steel mills to suspend operations in advance of the holiday. SMM assessed rebar profits at 351.5 yuan/mt as of January 16, 126 yuan /mt lower than that of hot-rolled coil, based on seaborne iron ore price of $96.8/mt.
SMM expects rebar prices to remain steady in the run-up to the CNY holiday, but elevated inventories could keep prices under downward pressure after the holiday if downstream demand fails to recover swiftly on weather issues.
According to SMM data, rebar inventories at Chinese steelmakers stood at 2.37 million mt as of January 16, two weeks prior to the Chinese New Year holiday. This was up 5% from January 9, compared to a 3.7% rise last week.
Inventories across social warehouses advanced 19% on the week and stood at 4.74 million mt, accelerating from a buildup of 16.1% in the previous week. Social inventories were 8.2% higher than that in the same period a year earlier.
Overall inventories of rebar, including stocks across steelmakers and social warehouses, increased 13.9% and posted 7.1 million mt as of January 16, after an increase of 11.3% in the prior week.
On a yearly basis, overall inventories were 16.1% higher as of January 16, following after a buildup of 6.6% last week.
Source: SMM News