Money Chinese steel inventories are declining fast

15:01  10 may  2018
15:01  10 may  2018 Source:   businessinsider.com.au

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China 's steel rebar futures rose on Tuesday, almost matching a five-week high hit during previous session, as concerns over weak demand subsided amid declining inventories .

Chinese steel futures traded near a seven-week high on Thursday as construction demand in the world’s top steel user gets well underway. The sustained decline in inventories shows seasonal construction demand had been picking up, although later than usual given that China ’s annual

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Chinese steel inventories are now falling quickly after hitting a multi-year high earlier this year.

The dramatic turnaround can be seen in the chart below from ANZ Bank, showing inventory levels this year compared to 2017 as well as the range over the past five years.

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Having led to a sharp pullback in steel and bulk commodity prices earlier this year, fanned by fears that Chinese steel demand may be softer-than-expected during the Spring construction season, Daniel Hynes and Soni Kumari, Commodity Strategists at ANZ Bank, say the sharp reduction in inventories has helped to boost both sentiment and prices over the past month or so.

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US steel prices have dropped to global levels. Most steel companies expect service center inventories to decline in the first half of 2015 and increase in the second half.

While service center steel inventories declined by more than 22% YoY in April, they were almost flat compared to March. Part 2 - Are Chinese Steel Demand Indicators Really That Bad?

"Steel prices recovered strongly in April. Part of this has been a fall in inventories," the pair wrote in a note today.

"Strong domestic demand reversed the build-up seen earlier this year. Total steel stockpiles hit a four-year high of 19 million tonnes in March but they have fallen 30% since.

"This should ease concerns that the seasonal restocking phase ahead of the peak demand period was going to be subdued."

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In a nutshell, silver inventories declined nearly 90% from their record peak set in March, 2013. Above the ground physical Silver is being consumed at a much faster rate 1.1 billion oz plus minus .1 per annum. Chinese silver inventories are declining .

Due to traders' sales prices staying below the ex mill prices as well as their cautious attitudes toward the future market, inventory of finished steel in China maintained decline amid uptrend of finished steel prices.

And with steel prices recovering as inputs such as iron ore and coking coal decline, it's seen Chinese steel mill profit margins increase back towards the highs seen late last year.

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Given the combination of falling inventories and high profit margins, it begs the question whether that could prompt steel mills to lift production, leading to increased demand for raw materials.

Hynes and Kumari suggest it might.

"We see iron ore prices finding a floor at current price levels and rebounding to $68 a tonne in the second half of 2018," they say.

The price for benchmark 62% iron ore fines currently sits at $66.46 a tonne, according to Metal Bulletin.

Iron ore markets are pretty quiet .
Iron ore spot markets finished mixed on Wednesday. Neither spot or futures showed any real reaction to news that Chinese new home prices rose in a larger number of cities in April compared to March. Providing few clues as to what direction iron ore markets may move on Thursday, Chinese futures were almost unchanged in overnight trade.SHFE Rebar¥3,676,0.05%DCE Iron Ore¥483.00,-0.31%Trade in Chinese commodity futures will resume at 11am AEST.

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