Stocks of rolled metal in China at the lowest level since January

Inventories of steel products in China's warehouses fell to their lowest level in five months as strong demand from the construction sector since the end of April reduced traders' inventories.

Steel stocks in 20 major cities stood at 9.66 million tonnes at the end of June, down 15.1% from the previous month, falling to their lowest level since late January, according to the China Metallurgical Association (Cisa).

Cisa usually conducts detailed monthly inventory estimates a few days before the end of the month. Stocks in the last week of January amounted to 8.18 million tons, which is the lowest figure this year.

In the last week of March, steel inventories hit a three-year high of 15.43 million tonnes as traders stockpile in anticipation of a spike in demand in the spring, when construction usually recovers from the winter calm. But demand only skyrocketed at the end of April.

Inventories of hot rolled metal declined 7.4% from a month earlier to 1.7 million, while inventories of rebar fell 20.9% to 3.76 million tonnes.

But demand has slowed over the past few days, affecting prices. Major rebar prices fell yesterday. Strong rebar supply and slower demand are key reasons for the weakness in prices as rainy weather in southern China interrupts construction work. But wet weather would have impacted construction work and could lead to increased inventories for traders.

Reduced production in China and reduced use may limit the short-term oversupply, but so far there has been no evidence of slowing production growth in China.