China: Finished Steel Stocks with Mills Fall, Output Ramps Up

Total stocks of the five major finished steel products held by the 184 steelmakers across China which Mysteel monitors declined steadily at a fast pace over the Apr 2-8 week to 9.45 MnT, down by another 7.5% on week and making for the lowest level since February, according to Mysteel's latest weekly survey.

The decrease was steeper compared with the fall of 6.1% recorded over the prior week, even though domestic steel mills had ramped up production during the same period, Mysteel Global notes.

The five major products tracked are rebar, wire rod, hot rolled coil, cold rolled coil and medium plate. Over the Apr 2-8 period, China's production of the five items totalled 9.83 MnT, seeing a large increase of 5% on week as against with the prior week's 2.4% growth, Mysteel's data showed. The week's output was also close to the 10.35 MnT produced one year earlier.

"The inventory levels held by mills saw a large decrease (over the past week) when production had been increasing rapidly, which indicates that demand from downstream users kept firm as operations are returning to normal with the arrival of Spring," a market source in Shanghai explained.

Recently, spot sales in China's steel market have improved further. For example, trading volume of construction steel comprising rebar, wire rod and bar-in-coil among the 237 sampled trading houses across China has been staying above the peak season threshold of 200,000 MT/day for the fifth consecutive working day as of Apr 9, with the tonnage averaging 242,161 MT/d over Apr 3-9, higher by nearly 20% on week, according to Mysteel's data.

With the steady improvement in consumption, the decline in the inventories held by domestic steel traders also accelerated over the Apr 3-9 period. Total tonnage of the five items held by traders in 132 cities countrywide slid to 33.76 MnT as of Apr 9, marking for a week-on-week fall of 4.3%, quicker than the 3.5% decline in the prior period.

However, destocking is still the theme for China's steel market currently, and the rapid growth in output is placing steel prices under a lot of pressure, Mysteel Global notes.

The national average price for HRB400 20mm dia rebar, a bellwether of domestic steel market sentiment, has been hovering around Yuan 3,600/MT ($511/MT) recently. The price witnessed a rise of Yuan 22/MT on week to Yuan 3,600/MT including the 13% VAT as of April 9, according to Mysteel's database.

Table 1 - Five major steel products inventories at mills Unit: '000 tonnes

Table 2 - Five major steel products inventories at traders (Apr 3-9)

Note: Mysteel has started publishing the new set of data regarding traders' steel inventories starting Mar 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.