Steel stocks at Chinese traders rise

The stocks of the key finished steel items held by traders across China continued increasing over July 3-9 given the dampening effect of the intense rains on sales. However, the pace of growth in inventories slowed over the period due to the decline in production and the moderate improvement in market sentiment which stimulated a rise in trading, Mysteel Global noted.

The stocks of rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate held by steel traders in the 132 Chinese cities Mysteel monitors increased for a third consecutive week over July 3-9, rising by another 298,500 tonnes or 1.3% on week, as against the 548,500 tonnes on-week surge seen in the prior week, to reach 22.5 million tonnes as of July 9, Mysteel's survey showed.

The slowdown in stocks growth was partly attributed to the decline in steel output, with the production of finished steel products losing 238,200 tonnes on week to reach 10.8 million tonnes over July 2-8, Mysteel's data showed.

But better sentiment in the spot market also played a part, sources noted. Confidence was improved by the strengthening futures market, with the most-traded rebar contract for October delivery on the Shanghai Futures Exchange rising by Yuan 157/tonne ($22.5/t) from the settlement price on week earlier to end the daytime session on July 9 at Yuan 3,726/t.

A futures analyst in East China's Jiangsu told Mysteel Global that the healthy futures prices have encouraged the sentiment in the physical market and boosted sales as well. The daily trading volume of rebar, wire rod, and bar-in-coil among the 237 traders across China Mysteel canvasses rose to a one-month high of 260,507 tonnes/day on July 8, up 2.1% on day or 32.7% higher on week, Mysteel's data showed.

"Steel demand is average now, of course, as the rainy days have affected it a bit," a Shanghai-based steel trader admitted. "When the foundations are being laid for a building project, rainfall can certainly affect the process because this stage is critical. But once these have been laid, the impact of rain on other processes such as erecting and welding parts of the superstructure is much lighter, thus there is still demand," he told Mysteel Global.

Another Shanghai-based steel trader noted that he'd seen wire rod demand pick up a little recently, which was also reflected in the stocks survey. Wire rod stocks held by those traders reversed the overall rising trend and actually lost about 76,700 tonnes on week to reach 3.7 million tonnes as of July 9.

Over July 3-9, steel inventories held by traders in Mysteel's former smaller sample across just 35 cities increased too by 283,700 tonnes or 1.9% on week to 15.1 million tonnes, still 27.2% higher on year.

This article has been published under an article exchange agreement between Mysteel Global and SteelMint.

Photo Credit - World Steel