China's market-level steel inventory crosses 10 mn t in 8 weeks

China's inventories of rebar, wire rods, hot-rolled products, heavy plates, and cold-rolled products, both at the market and manufacturer levels, continued to increase for the fourth week in a row. The market level inventory crossed 10 million tonnes (mn t) in eight weeks, while hot-rolled and heavy plate producers' inventories decreased.

Market inventories

As of 21 Jan'22, China's rebar, wire rod, hot-rolled, heavy plates, and cold-rolled inventories were recorded at 15.52 mn t, up 11% w-o-w. In this, the share of market inventories stood at 11.17 mn t, up 15% w-o-w.

Rebars amounted to 5.17 mn t, up 24% w-o-w while wire rods were at 1.35 mn t, up 29% from the previous week.

Hot-rolled products were at 0.28 mn t, heavy plates at 11,122 t, and cold-rolled at 0.15 mnt, up 3.7%, 2.6%, and 2.4% respectively compared to the previous week.

Producers' inventories

Producers' inventories stood at 4.36 mn t, up 2.7% w-o-w. Rebar producers' inventories stood at 1.91mn t, up 7% from the previous week, and wire rods at 0.61 mn t, up 3.7% w-o-w.

Meanwhile, cold-rolled stock was at 0.03 mn t, up 4.8% from the previous week.

In the fourth week of January, the increase in producer-level inventory was similar to the previous week, but the increase in social inventory was rather large. Some Chinese players cited the relocation of some producers' inventories, the influx of winter supplies, and the sharp drop in transactions just before the Lunar New Year holidays.

Sales

Hot-rolled and heavy plates' sales decreased by 3.3% and 2.9% compared to the previous week by 0.79 mn t and 0.69 mn t respectively.

Nominal consumption and production of 5 major commodities

Nominal consumption of the five major commodities decreased by 11% w-o-w. Hot rolled steel increased 2% and heavy plates by 1.5% w-o-w , while rebars decreased by 32.4% compared to the previous week , wire rod by 25%, and cold-rolled steel by 2.4% compared to the previous week.

The production of the five major items inched up 0.3% from the previous week. Hot-rolled and cold-rolled steel increased by 2% and 0.4% compared to the previous week, while rebars dipped 1.1%, wire rods dipped by 0.1%, and cold-rolled products dipped by 0.4%, w-o-w respectively.

In the fourth week of January, the production advantage over nominal consumption based on the total of five items was maintained. Nominal consumption decreased by 11.9% compared to the same period last year, and production decreased by 11.5% from the previous week, respectively.

Particularly, rebar consumption decreased by 32.4% w-o-w and 30% y-o-y respectively.
Total inventory of China's five major items decreased 13% from the previous year, excluding cold-rolled steel , which increased by 21.5% from the previous year. Rebar sales fell 20.5%, wire rods fell 18.8%, hot-rolled products by 4.9% and heavy plates 8.8 % annually.

Rebars witnessed the largest increase in inventory. However, the market inventory decreased by 11.7% y-o-y, and producers' inventory decreased by 37.5% y-o-y. Meanwhile, production inventory also decreased by 21.9% on a yearly basis.

Operating rate of BF and EAF in China

As of 28 Jan'22, the operating rate of blast furnaces in China was recorded 74.86%, up 12.47% against the year-ago period and 1.39% w-o-w. The operating rate of electric furnaces at 71 locations decreased by 16.24% w-o-w.

In the case of flat products, strict production cuts centered on Hebei province, China's largest production region. China's daily crude steel production in Nov'21 declined by 22% y-o-y and China's daily crude steel production in Dec'21 had edged down by 7% compared to the year-ago period, thereby, contributing to the decrease in inventory.

Outlook

As trading volume decreases during the Lunar New Year holiday (31 Jan-6 Feb'22), the speed of depletion of steel inventories in China may be slow, but the accumulation of inventories might be limited as steel production activities and carbon emissions are controlled ahead of the Winter Olympics.

Some Chinese rebar manufacturers are expected to maintain their stocks of rebar and wire rods at a trough during February, March and April owing to a significant increase in steel demand after the Lunar New Year holidays and Winter Olympics. Also, financial support for the infrastructure sector from Q4CY'21 to Q1CY'22 contributed to the increase in steel demand.

Note: This insight has been published in accordance with an article exchange agreement between SteelMint and SteelDaily.