China rebars, rods output to fall in CY'22

The central government's call for China to achieve peak carbon and carbon neutrality will continue to influence industrial output generally next year, Mysteel notes, and though the curbs on steel output may not be as severe in 2022 as this year, overall production of rebar and wire rod is estimated to decline at least by 11 million tonnes, the report showed.

Meanwhile, the total output of the two items this year is expected to reach 419.9 million tonnes, significantly less than the 434 million tonnes the country produced during 2020, Mysteel Global noted.

However, China's capacity of the two items will expand moderately in 2022, with some 11 new rolling mills being added nationwide, equivalent to 13.45 million tonnes or 2.2%, Mysteel estimated. Among which, new bar mills will account for 10 lines. East China's Jiangsu will host most of the new capacity next year, contributing to 5.1 million tonnes or 37.9% of the total.

As for demand for rebar, China's apparent consumption of this product during 2022 is seen climbing strongly initially and then trending downwards mildly. The total consumption volume of these bars will slip by 3.1% on year to 265.4 million tonnes, according to the report.

This is mainly because there will be no increment in newly-launched construction projects in Q2 2022, and the growth in domestic property investment may also slow down during Q3 and Q4, Mysteel noted. Though China exports very few rebar and rods - most are produced and consumed domestically - uncertainties regarding overseas markets due to continuing COVID pandemic will also limit exports, Mysteel notes.

Monthly rebar consumption next year will peak 26.2 million tonnes in April 2022, Mysteel predicts, as spring is traditionally the peak steel-consumption season in China. Nonetheless, the peak volume will still be 5.4% lower on year, according to the report.

During 2022, the total rebar stocks at the 137 Chinese mills and at the commercial warehouses in the 132 Chinese cities under Mysteel's tracking may decline throughout the year, and the inventory build-up in the construction off-season in winter may be relatively low, Mysteel noted. The peak volume of stocks may reach 24 million tonnes in February 2022.

Specifically, the stocks of rebar will mount in Q1 next year in step with the rise in output as mills are enjoying relatively high profits, which will, in turn, propel them to produce more. And over April-May 2022, end-users may see their financial condition recover significantly and demand is also expected to be released, so the destocking pace may accelerate later on, according to the report.

Regarding rebar spot prices, these will be generally range bound throughout 2022, the report stated. The country's national price of HRB400E 20mm dia rebar under Mysteel's assessment may average Yuan 4,403/tonnes ($691/t) in 2022, or down substantially by Yuan 684/t or 13.5% on the year, while the highest and lowest levels will be at Yuan 5,100/t and Yuan 3,800/t respectively. The prices all include the 13% VAT.

China's blast-furnace mills may see the profits they earn producing rebar remain at a comparatively high-level next year, thanks to the easing of production costs, while electric-arc-furnace mills across China may see some contractions on their rebar profits during 2022, according to the report.
China's output and consumption of rebar, rods over 2021-2022

Source: MySteel
Written by Rong Zhang, zhangronga@mysteel.com

This article has been published under an exchange agreement between MySteel Global and Steelmint.