Shanghai steel rebar prices fell for a second straight 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 tonnes to 10.1 million tonnes as of Friday, with rebar increasing 0.1 percent to 4.78 million tonnes and hot-rolled coil rising 2.9 percent to 2.01 million tonnes, data from Mysteel consultancy showed.
That comes after 14 straight weeks of declines in inventory.
Meanwhile, steel mills continue to ramp up output on the back of bumper profit margins. Utilisation 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 expected 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 closed 1.1 percent lower at 3,723 yuan ($569.71) a tonne.
Spot steel prices fell 0.2 percent to 4,368.55 yuan a tonne on Friday, Mysteel data showed.
On the other hand, Dalian iron ore futures marked their biggest intraday gain in six weeks, adding 2 percent to 464 yuan a tonne by the end of Monday amid rapid de-stocking at ports.
Stockpiles of imported iron ore at Chinese ports dropped by 2.35 million tonnes last week to 1.55 million tonnes, a sign of strong restocking demand at steel mills.
Currently, steel mills typically earn more than 700 yuan from producing a tonne of steel billet. That compares to a record of nearly 1,000 yuan a tonne during the winter when mills were under production curbs.