Tianjin Alcoa International Trade Co., Ltd. , https://www.tjalcoa.com
Steel market enters "destocking" stage
The domestic steel market has entered a critical phase of "de-stocking" following a prolonged period of inventory buildup. Since the fourth quarter of last year, the market has experienced significant pressure, with rising social inventories and weakening demand, especially around the Spring Festival. Construction steel inventories surged, creating substantial pressure on the supply chain. This pressure peaked in early March, but recent price increases in rebar in Beijing and hot-rolled coils in Tianjin signal subtle shifts in market dynamics.
Although some steel prices have remained stable, trading volumes have started to rise, indicating a gradual shift in supply and demand. As market operations stabilize, investor sentiment is expected to weaken, paving the way for more active transactions. This suggests that the steel market is gradually moving into the "de-stocking" stage, where inventory levels will slowly decrease.
Currently, total social inventory stands at approximately 20 million tons, which is high given the daily crude steel output of about 2 million tons. In construction steel, inventories are particularly heavy, with Guangzhou holding the largest stock, largely due to seasonal concentration. The price gap between Guangzhou and Beijing has led to a flow of northern resources southward, contributing to the surge in Guangzhou’s inventory. Meanwhile, Beijing's construction steel inventory has reached 100,000 tons, creating considerable pressure.
In Shanghai, the market remains relatively stable with around 600,000 tons of construction steel in inventory, while Tianjin and Shenyang also face high stock levels. Overall, the combination of seasonal factors and weak demand has pushed social inventories to a peak, setting the stage for a gradual de-stocking process.
Sheet metal inventories, including hot-rolled and cold-rolled coils, are slightly less pressured than construction steel, though still significant, totaling over 6 million tons. Export activity has helped alleviate some of this pressure. In Shanghai, hot-rolled coil inventory is around 1 million tons, and cold-rolled plate inventory is about 400,000 tons. Guangzhou also shows high levels, with over 800,000 tons of hot-rolled coils and 600,000 tons of cold-rolled Plates.
Despite these challenges, the market is still under downward pressure. Price fluctuations remain frequent, and regional differences persist. For example, hot-rolled coil prices in Tianjin are about 100 yuan/ton higher than rebar prices in the same region, creating additional pressure. While these differences may benefit certain products, they generally hinder overall market stability.
Looking ahead, as the market continues to adjust, the de-stocking process will likely accelerate. With seasonal demand picking up and inventory levels gradually decreasing, the market is expected to stabilize further. However, the path to recovery will not be smooth, and price volatility is expected to continue. Nevertheless, increased transaction activity and improved market confidence could support a more sustainable recovery in the coming months.