China mills’ stocks rise on shrinking demand

Stocks of the five major finished steel products held by the 184 steelmakers across China which Mysteel monitors reversed up during June 4-10 after inventories had steadily declined over the previous three months. The climb reflected the on-going rally in steel production when consumption is shrinking because of the rainy season, Mysteel Global notes.

As of June 10, total stocks of the five major steel products comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate at mills’ yards had increased by 0.9% on week to 5.7 million tonnes, or jumping by 21.1% on year, according Mysteel’s latest weekly survey.

Steel demand from users slowed down over the past week because of the heavy rainfalls in South China and the frequent rainy weather in East China, Mysteel Global learned. At the same time, high temperatures in North China also slowed sales of steel for outdoor construction use.

Another Mysteel survey among the 237 sampled trading houses across China showed that daily trading volume of construction steel including rebar, wire rod and bar-in-roll averaged 209,944 tonnes/day over June 5-11, down 17% on week.

Also over June 5-11, finished steel stocks of the same five items held by traders in the 132 cities across China which Mysteel checks emptied at a slower pace of 2.9% on week to reach 21.9 million tonnes. The decline was slower than the 3.9% drop recorded one week before, Mysteel’s survey showed.

However, over June 4-10 steel production continued rising for a sixth consecutive week, with the total tonnage of the five major steel products up by another 1.5% on week to 10.9 million tonnes, the highest since Mysteel commenced the survey in May 2015, according to Mysteel’s data. The reasonable margins they continue to earn are making the mills very enthusiastic producers, Mysteel notes.

“The high level of production will put domestic steel prices under more pressure in the coming term,” a market source in Shanghai expressed. “On the other hand, demand from end-users may shrink further, now that we’re in the traditional off-season for steel consumption, thanks to the frequent rainfalls (in South and East China) and high temperatures (in North China),” he warned.

As of June 11, China’s national price of HRB 400 20mm dia rebar was at Yuan 3,827/tonne ($540/t) including the 13% VAT, lower by Yuan 33/t compared with the five-month high reached on Thursday, or down Yuan 231/t on year, according to Mysteel’s database.

Table 1 Five major steel products inventories at mills (Jun 4-10)

Table 2 Five major steel products inventories at traders (Jun 5-11)

Note: Mysteel has started publishing the new set of data regarding traders’ steel inventories starting March 19 to better reflect the market situation with bigger sample sizes, as explained in the previous data update. Month-on-month and year-on-year comparisons will be filled up on later dates when they are available.

Rebar and wire rod: Sample size is now increased to 429 warehouses in 132 Chinese cities from the previous 215 warehouses in 35 cities.

Hot-rolled coil (HRC): Sample size is increased to 194 warehouses in 55 cities from the previous 138 warehouses in 33 cities.

Cold-rolled coil (CRC): Sample size is increased to 182 warehouses in 29 cities from the previous 134 warehouses in 26 cities.

Medium plate: Sample size is increased to 217 warehouses in 65 cities from the previous 132 warehouses in 31 cities.

The old set of data is still available in the separate databank service until March 11, 2021.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.