China Steel mills’ Finished Steel Stocks Hit 5-Year High

Five major finished steel stocks at the 184 Chinese steel mills under Mysteel’s weekly survey shot up to a nearly five-year new high of 11.5 MnT as of February 12, as sales to the domestic downstream users have been slow and deliveries to the traders have been stalled, both because of the ongoing battle against the Novel Coronavirus Pneumonia (NCP) outbreak, according to the latest survey.

The stocks had been up for the sixth straight week over February 6-12, up another 17.5% on week, and the products including rebar, wire rod, hot rolled coil, cold rolled coil and medium plate, exceeded 10 MnT for the first time since Mysteel launched the survey on February 25, 2015, according to Mysteel’s database.

China’s integrated steel mills normally keep operating during the Chinese New Year holiday though at a lower pace instead of idling their blast furnaces out of concern of safety and cost effectiveness with their big sizes nowadays, even so, domestic demand for steel has failed to recover as expected after the holiday because of the virus outbreak has delayed the resumption of many construction sites and manufacturers, as reported.

In the near term, China’s steel market sources are concerned that these mills’ finished steel stocks may mount up further as sales will probably stay thin and deliveries will stay slow as it will take time for the transportation of cargoes especially via trucks to return to its normal level, and domestic steel prices, as a result, will be under downward pressure.

As of February 13, national average benchmark price for HRB 400 20mm dia rebar dropped to Yuan 3,742/MT ($535/MT) including 13% VAT, a nearly six-month low or down Yuan 92/MT from January 23, the last working day before the Chinese New Year holidays, according to Mysteel’s price data.

“To reduce the pace of the stocks build-up, there have been maintenances of rolling mills going around some Chinese steel mills,” a Shanghai-based ferrous analyst said.

Shagang Group, the country’s largest privately-owned steelmaker in East China’s Jiangsu province, has launched maintenance on its two rebar rolling lines since February 13, reducing rebar output by 5,400 MT/day, though a company official clarified that the maintenance has been long planned instead of a rush decision because of the market situation, as reported.

Recent maintenances saw rebar output from 137 Chinese steel mills under Mysteel’s other survey dropped to a nearly three-year low of 2.6 MnT over February 6-12, or down 6.2% on week.

In the near term, both manufacturers and construction sites in China may take some time to return to their normal operation level even if their workers are able to travel in large numbers to their working cities from their hometowns soon, as all the employees from other cities will need to be having a 14-day quarantine upon arrival, Mysteel Global understands from the market.