The market anticipates this due to the likelihood of a balance between long steel demand and production, potentially leading to improved profit margins for steelmakers.
During January, Chinese construction steel prices remained relatively stable, with actual demand from end-users shrinking and spot trading gradually slowing down. By January 31, the national price of HRB400E 20mm dia rebar had decreased by Yuan 34/tonne ($4.7/t) compared to the end of December.
In the previous month, many mini-mills across China halted operations early for the Chinese New Year celebrations, contributing to a decline in operational rates for integrated mills. By the end of January, the weekly output of rebar among the steelmakers monitored stood at 2.16 million tonnes.
Numerous domestic steelmakers, particularly blast furnace mills, are currently operating at a loss, though there has been some narrowing due to reduced production costs. As of January 31, domestic blast furnace mills were still experiencing an average loss of Yuan 143/t on rebar sales, while electric arc furnace steelmakers managed to earn Yuan 81/t.
The pace of the recovery in rebar output after the Chinese New Year holiday is expected to be gradual, potentially resulting in relatively balanced fundamentals for construction steel post-holiday.
Stocks of construction steel products, including rebar and wire rod, saw a notable increase last month due to weakening demand and winter restocking among traders. However, the growth in inventories was significantly lower than the previous year.
Additionally, China's spot trading of construction steel decreased last month due to seasonal factors, with the transaction volume decreasing by 25.2% compared to the previous month.
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