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April 25, 2018

Rebar prices up on overcapacity cuts but see limited momentum

SHANGHAI, Apr 23 (SMM) – Rebar prices have gained continuously since March 27 but SMM expects pressure from greater supplies in the near future as steel plants resumed operations on improved weather and higher profits. Growing demand, smaller inventories and environmental protection measures buoyed prices of rebar.

We remain pessimistic on steel prices in the long term as demand is likely to lack rising momentum after the traditional high season in April.

The rebar 1810 contract gained some 2.2% to 3,550 yuan/mt at noon of Monday April 23, and led the gains in the metals market. China’s resolution to address overcapacity of key industries accounted for the gain in the contract. According to a notice by China’s six ministries and commissions, some 30 million mt of steel capacity and 150 million mt of coal capacity will be cut in 2018.

China's inventories of long steel continued to decline last week, SMM data showed. Social inventories of long steel fell 938,000 mt to 16.42 million mt; rebar social inventories declined 631,400 mt to 8.05 million mt, in-plant inventories of rebar dipped 283,500 mt to 2.62 million mt and hot-rolled coil’s social inventory dropped 62,400 mt to 2.42 million mt.

While stocks of in-plant rebar shrank 11% week on week, several rebar specifications nearly depleted in the Chinese market last week. Current in-plant inventories are at low levels across seven large steel plants in east China, according to an SMM survey. Steel prices in the northern domestic market rose on decreasing inventory and high demand, which is likely to drive the north-south price gap back to the normal range. Consumption continued to be robust, driven by the construction industry.

In the hot-rolled coil market, spot prices notched four consecutive weeks of gains to stand at 4,037.9 yuan/mt on Monday April 23. It is likely to hover within a range of 260-320 yuan/mt. SMM believes that low inventories will continue to provide support to prices this week.

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