Chinese steel traders cautious about winter restocking
A long-established practice among steel traders and distributors across China is to use the winter months to gradually accumulate steel – when demand is poor, and steelmakers are more willing to offer discounts – to be ready when building activity perks up with the approach of spring. This is generally after the traditional Chinese New Year holiday which in 2024 will end around February 18.
During this winter, among the 692 enterprises including 643 traders sampled across major domestic steel markets, 238 or 34.4% of the respondents said they were taking the initiative to stock up steel products during the winter months, while 233 or 33.7% replied that they have no such inclination so far, Mysteel's survey found.
Specifically, traders in North China were more willing to build winter inventories as their winters are longer and most view the restocking movement as an investment channel, according to market sources.
Overall, Mysteel's survey found that pessimism about China's steel demand ranked the top impediment to traders' restocking, while price trends of finished steel products were also another major concern among respondents.
Real estate development, the country's largest steel-consuming sector, has underperformed throughout this year so far, despite a series of stimulus policies rolled out by the central government to encourage investment and fire up construction, Mysteel Global notes.
For example, by end-September, China's national real estate index – where the base year is 2012 and the growth rate is 100 – showed that the property market stayed in the negative zone at 93.44, according to data from China's National Bureau of Statistics (NBS).
Over January-September, the total area of newly launched property projects plunged by 23.4% on year to 721.2 million sq m, with residential housing projects also decreasing by 23.9% on year to 525.1 million sq m, the NBS data showed.
Looking ahead to the first half of 2024, most respondents believed that the price of rebar, a major construction steel item, will increase slightly yet remain at a relatively low level, with the national price of rebar falling from recent levels initially to about Yuan 3,400-3,500/tonne in January-February, before rebounding to the Yuan 3,500-3,700/t range over March-June next year.
As of October 30, China's national price of HRB400E 20mm dia rebar was assessed by Mysteel at Yuan 3,878/t including the 13% VAT, refreshing a one-month high.
Under such circumstances, those companies with some interest in building inventories were nonetheless generally cautious regarding quantity, Mysteel's data suggested, with 63% of them planning to accumulate less than 10,000 tonnes of steel this winter.
Compared with last year, 49.5% of the companies with restocking intentions planned to postpone the start of their restocking by around half a month till late December-early January, as the Chinese New Year holiday will kick off later in February in 2024. Meanwhile, 53% planned to hold their inventories at hand for only 1-2 months to minimize their risks, Mysteel's survey showed.
Over October 20-26, stocks of the five major carbon steel products – comprising rebar, wire rod, hot-rolled coil, cold-rolled coil and medium plate – at trading warehouses in the 132 cities Mysteel tracks nationwide were at a nine-month low of 16.98 million tonnes, Mysteel's latest weekly survey showed. This was still higher by 3.1% on year, however.
Written by Carly Chen, chenziyi@mysteel.com and Rong Zhang, zhangronga@mysteel.com
Edited by Russ McCulloch, russ.mcculloch@mysteel.com
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