Chinese steel traders' stocks down on robust demand

Posted on 09 April 2021

Robust demand saw finished steel inventories at Chinese trading warehouses sampled by Mysteel continue to drop over April 2-8, making for their fifth straight weekly slide, the latest survey showed.

The stocks of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate among traders in 132 cities declined by 4.3% on week to 28.4 million tonnes as of April 8, Mysteel’s latest stocks survey showed. The traders’ holdings of the five items had declined by another 1.3 million tonnes on week, but this was slower than the 5.1% on-week drop over the previous March 26-April 1 period, equivalent to 1.6 million tonnes on week.

Behind the slowing pace of the decline in stocks was the fact that production of those five major steel items reversed up after declining for six successive weeks, gaining 60,000 tonnes on week to 10.6 million tonnes over April 1-7, according to Mysteel’s production survey among 184 steel mills across the country.

But the sustained strong demand continued to encourage the digestion of the inventories, with the trading volume of construction steel including rebar and wire rod among 237 domestic steel traders averaging 294,520 tonne/day over April 1-7, up by a strong 15.8% on week, the data showed.

The market’s hopes for steel prices remain optimistic. Players are persuaded by the steady decrease in steel stocks and the possibility of steel operations being constrained throughout 2021 by the central government’s ambitions to take China to carbon neutral, market sources said. The production curbs in Tangshan in North China’s Hebei province, China’s major steel producing hub, are also helping sentiment.

“Average profits among all steelmakers are very close to those they were earning 2018, which may result in rises in steel production in the near run, especially in regions except Tangshan,” a North China-based steel mill official said. “But ‘low carbon footprint’ has become a key phrase this year, and at the same time the central government is determined that crude steel production will be cut this year. Both these factors will limit the scope for production to rise significantly this year,” she said.

However, some sources also worry that the expensive steel prices might negatively impact steel consumption, in which case the extremely high prices would face great risks.

The inventories of finished steel products in Mysteel’s former smaller sample across just 35 cities also declined 866,500 tonnes on week to 18.8 million tonnes as of April 8. 

Source : Kallanish