China’s steel stocks at lowest level since January



Source: ARGUS

China’s steel stocks have fallen to the lowest level for five months, as robust downstream demand from the construction sector since late April has reduced traders’ inventories.

Steel stocks in 20 major cities were at 9.66mn t on 21 June, down by 15.1pc from 11.38mn t a month earlier to the lowest level since the end of January, the China iron and steel association (Cisa) said.

Cisa usually conducts detailed monthly inventory assessments a few days ahead of the month-end. Stocks in the last week of January were at 8.18mn t, the lowest so far this year.

Steel stocks hit a three-year high of 15.43mn t in the last week of March as traders build inventories in anticipation of a spike in demand in the spring, when construction typically rebounds from the winter lull. But demand only took off around late April.

Stocks of hot-rolled coil fell by 7.4pc from a month earlier to 1.7mn t on 21 June, while rebar stocks fell by 20.9pc to 3.76mn t. Inventories of wire rod, another key long product, fell by 27.2pc to 1.35mn t.

But demand has slowed over the past few days, pressuring prices. Mainstream rebar prices fell yesterday by the biggest amount in recent days, with Shandong rebar dropping by 80 yuan/t ($12.21/t) from 22 June to Yn3,970/t ex-warehouse.

The key reasons for the price weakness are abundant rebar supply and slower demand as rainy weather in south China interrupts construction work. The rainy season has started late this year, which could mean fewer rainy days this year. But wet weather would affect construction work and may lead to rising inventory at traders.

China’s anti-pollution output cuts and summer mill maintenance could limit the supply surplus in the near term, but so far there has been no evidence that China’s steel output growth is slowing.

Source: ARGUS