Steel product inventories in 20 major markets in China have fallen to an 11-month low because of strong demand and environmental-related output restrictions.
Steel stocks were at 9.29mn t on 24 July, down by around 4pc from 9.67mn t in the last week of June. Stocks were last lower at the end of January, at 8.18mn t, figures from the China iron and steel association (Cisa) show.
Steel stocks at Cisa-affiliated mills fell by 5.4pc from a month earlier to 11.57mn t in the last week of July, indicating stronger offtake by traders and consumers.
Steel inventories in major markets peaked in March and have been falling ever since, as double-digit growth in real estate investments for most of this year has boosted downstream demand from the construction sector. Growth in flat steel demand has been more modest, driven mostly by higher output of machinery and automobiles.
Steel inventories have fallen despite monthly crude steel output exceeding 80mn t mark for the first time in May, and again in June.
Wire rod inventories fell by 14.1pc from a month earlier in July to 1.16mn t, while rebar stocks were 6.1pc lower at 6.53mn t. Stocks of hot-rolled coil increased by 5.6pc to 1.8mn t, while cold-rolled coil stocks fell by 0.6pc to 1.78mn t.
Steel demand and prices are likely to remain strong in the second half of this year, as demand is boosted by an acceleration in new real estate project start-ups, higher property prices in second and third-tier cities and increased sales of new land for projects. Real estate projects that received investments earlier in the year will also be entering the construction phase in the second half.
Moderate growth is expected in the automobile and machinery sectors, while infrastructure investment growth is likely to stabilise after slowing significantly in the first half of the year, said the China Steel Logistics and Professionals Committee (CSLPC).
Environmental restrictions on steelmaking have been imposed in cities such as Tangshan, Wu’an, Handan and Changzhou. Steel output cuts are likely to be imposed in up to 80 cities in the coming winter, up from 28 cities last winter. These restrictions are on course to squeeze supplies to a much greater extent than the typical seasonal demand slowdown during the winter.