Posted on 07 Nov 2024
China's steel traders and steelmakers hold divided views on building up steel inventories during this winter, the results of a new Mysteel survey show.
A longstanding practice among China's steel traders and distributors is to gradually accumulate steel stocks during the winter when demand is low, and when steelmakers are more inclined to offer discounts. This enables traders to be well-prepared for a seasonal rise in building activities with the onset of spring, Mysteel Global notes.
In Mysteel's latest survey that sampled over 100 companies including traders and steelmakers across the country, 53% of traders indicated they plan to replenish stocks this winter, while 47% had no such plans.
Traders intending to restock cited optimistic market sentiment fuelled by favorable policies announced recently, both at home and overseas, as a key motivation. In addition, some traders have already locked in long-term contracts with steel producers, securing their supply during the winter months.
However, traders opting against stockpiling this winter emphasized their commitment to maintaining low inventory levels and concerns about potential losses if prices fall after the stockpiling season ends, according to the survey.
Last year, the average rebar price during the winter restocking period surpassed Yuan 4,000/tonne ($560/t). Traders who stocked up anticipated prices would continue to rise after winter, allowing for profitable sales. Instead, rebar prices declined post-winter, averaging Yuan 3,600-3,700/t and causing financial losses for those who had accumulated stocks.
For steelmakers, the situation is more cautious. With margins on steel sales under pressure and demand from downstream sectors remaining weak, 63% of the surveyed mills reported they would not be accumulating reserve stocks this year while only 37% expressed plans to do so, Mysteel's survey found.
Currently, traders are generally reluctant to stockpile at today's prices, which they view as too high. In terms of target pricing, traders are hoping for prices below Yuan 3,100/t, while steelmakers are looking for levels around Yuan 3,200-3,400/t. However, current average steel prices remain above these desired levels, dampening both groups' enthusiasm for building winter stocks.
As of November 5, Mysteel assessed China's national price of HRB400E 20mm rebar, a benchmark of the country's steel market dynamics, was at Yuan 3,604/t and including 13% VAT.
On timing, traders expect to begin restocking between December and January 2025, while steelmakers plan to start later, around late January 2025. The survey also revealed that most steelmakers currently hold low inventories of raw materials for production and are hesitant about replenishing at current prices. The mills have yet to set a target price range for raw materials for this year's stockpiling efforts.
Source:Mysteel Global
