China's steel stocks decline but at slow pace, keeping a lid on prices

          China's steel inventories declined in April but not as fast as most market participants expected, indicating that end-user demand recovery has not been strong enough to absorb surplus steel supply, keeping prices in check.

          China Iron & Steel Association said finished steel stocks held by its members as of April 20 tumbled 2.96% from early April to 17.42 million mt.

          Rebar inventories held by traders in eastern China's Hangzhou city -- one of the most active trading hubs in the country -- have almost stopped declining since mid-April after falling to around 0.97 million mt, local sources said. This was down 10% from the peak mid-March, but is still almost double the volume of a year earlier, sources added. Rebar has witnessed the strongest end-user demand among steel products since March due to the restart of construction activity in the country.

          Meanwhile, long steel inventories held by traders in southern China's Guangzhou and southwestern China's Chongqing municipality have dropped by about 14% and 30%, respectively, from their peaks in early March, local sources said. But both are still 30% higher than in the same period last year, they added.

          A source in Guangzhou said "real" market inventories should be higher than monitored levels, because some of the steel has been relocated to warehouses in other locations to make room for new arrivals. Much of this steel is not captured in official data.

          One Chongqing-based source said construction sector demand had recovered quickly in April, but not to the level of a year earlier. He said steel production had been rising quickly as well, especially from independent electric arc furnace steelmakers, and therefore the oversupply might ease in April.

          China's overall pig iron and crude steel production have continued to rise in April, according to CISA. Steel output averaged 2.61 million mt/day over April 10-20, up 0.27% from early April and 0.06% higher on the year.

          China's monthly steel exports are tipped to drop significantly in the second quarter to 3 million-4 million mt/month, from 6.476 million mt in March. Steel imports are likely to rise by close to 1 million mt/month over the same period from 1.137 million mt in March.

          Some sources said Chinese steel market inventories were likely to hover at abnormally high levels for much of 2020, therefore keeping steel prices in check.

-- Analyst Jing Zhang, Analyst Crystal Hao