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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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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.

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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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.

a close up of a map© Provided by Business Insider Inc

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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Chinese steel inventories are declining fast . Chinese steel inventories are now falling quickly after hitting a multi-year high earlier this year. Having led to a sharp pullback in steel and bulk commodity prices earlier this year

BEIJING, May 25 (Reuters) - Chinese steel and iron ore futures rose on Friday, with concerns over demand easing amid declining steel inventories in the world’s top producer of the material.

"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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Chinese steel futures rose on Friday, with concerns over demand easing amid declining steel inventories in the world’s top producer of the material. “ Steel and iron ore markets are highly-sensitive to changes in inventory .

Chinese steel futures rose on Friday, with concerns over demand easing amid declining steel inventories in the world’s top producer of the material. “ Steel and iron ore markets are highly-sensitive to changes in inventory .

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.

a close up of a map© Provided by Business Insider Inc

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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