Lower supply slows growth in China’s rebar inventories
Growth in China’s inventories of rebar continued to slow this week as supplies shrank after losses drove electric arc furnace (EAF) steelmakers to produce in lower gears.
An SMM survey found that the average operating rate across major EAF steelmakers has dipped 17 percentage points from a month ago to stand at 55% as of Thursday August 8.
Speculative buying waned as the re-escalation in US-China trade conflict grew market concerns, which kept rebar stocks on track to rise.
Steel mills with iron ore as feedstock maintained high operating rates this week as falling prices of iron ore kept their margins at around 100-200 yuan/mt while rebar prices slid. Despite eased production curbs in Tangshan, intensified controls in another key steelmaking city of Handan will help to stabilise overall production in August.
The average prices of rebar reduced 103.2 yuan/mt from a week ago and stood at 3,916.9 yuan/mt as of Thursday August 8 amid worries about macroeconomic development. SMM learned that spot trades started to pick up the in the second half of this week after the bearish sentiment eased.
Rebar prices are expected to receive support from fundamentals in the weeks ahead as supply shrink and downstream demand release after the slow season.
SMM data showed rebar inventories across social warehouses stood at 6.36 million mt as of August 8, up 1.8% on the week, slowing from a buildup of 2.1% a week ago.
Inventories across steel plants advanced 2.8% on the week to stand at 2.61 million mt, compared with a 4.8% rise a week earlier.
Overall inventories of rebar, including stocks across steelmakers and social warehouses, grew 2.1% on the week and posted 8.97 million mt as of Thursday August 8, after they grew 2.9% in the prior week. On a yearly basis, inventories stood 42.3% higher, expanding from a growth of 38.8% last week.