Shanghai rebar falls as inventory stokes glut concerns

Shanghai steel rebar prices fell for a second session on Monday, after data showing a rise in steel product inventory stoked concerns about weakening demand and oversupply in the market.

Weekly stocks of steel products had added 110,000 tons to 10.1 million tons as of last Friday, with rebar increasing 0.1 percent to 4.78 million tons and hot-rolled coil rising 2.9 percent to 2.01 million tons, data from Mysteel consultancy showed.

That comes after 14 straight weeks of declines in inventories.

Meanwhile, steel mills continue to ramp up output on the back of bumper profit margins. Utilization rates at steel blast furnaces across China rose 0.14 percentage points to 71.55 percent last week compared to the week before, Mysteel data showed, although environmental inspections are continuing in some key steelmaking regions.

“As steel demand is waning, the pressure of increased output will gradually appear in inventory data... Market sentiment is turning to caution from positivity, with steel traders and downstream users reluctant to replenish their stockpiles,” analysts at Orient Futures said in a note.

An official from China’s Iron and Steel Association warned of the risk of a glut with the quick release of advanced production capacity and the resumption of illegal low-end rebar production. However, she expects steady steel demand in the country in the second half of 2018.

The most-active construction steel rebar futures on the Shanghai Futures Exchange continued to fall on Monday after posting their biggest weekly loss since March. They had dipped 1.1 percent to 3,723 yuan ($571.07) a ton.

Spot steel prices fell 0.2 percent to 4,368.55 yuan a ton on Friday, Mysteel data showed.