China's steel inventories hit a 13-month high on April 20 as the country's steel production continued to rise steadily on weak demand amid the latest COVID-19 outbreak.
China's domestic markets have a mixed outlook for steel demand in the coming weeks due to pandemic-related uncertainty.
Some sources said demand could rebound strongly once the spread of COVID-19 was contained to address the oversupply problem, while others said demand recovery would be moderate and short-lived unless stronger stimulus was put in place .
China's daily steel production increased by 0.4% since early April to 2.889 million tons per day between April 11 and April 20, according to data from the China Iron & Steel Association on April 27.
China's steel production averaged 2.882 million tons per day in the first 20 days of April, up 1.2% from March.
Finished steel inventories in steel mills and CISA-monitored spot markets rose 3% since April 10 and up 8.4% year-on-year to a 13-month high of 33.01 million tonnes on April 20.
Steel production in China from late April to mid-May is expected to be the same as in the first 15 days of April, the sources said, as weak steel demand and logistics disruptions in most parts of the country limit production growth.
Supply chain disruptions amid Beijing's zero tolerance for COVID-19 have hurt end-users of steel in the construction and manufacturing sectors, exacerbating oversupply, sources said.
Meanwhile, domestic steel prices in China eased slightly due to oversupply, with S&P Global Commodity Insights showing rebar prices in Beijing down about 6% from April 26.
Some sources say that steel demand may recover sometime in May, which will prevent a sharp drop in steel prices. Others say the recovery in China's construction and manufacturing sectors is likely to be slower in May and June as the country's lockdown measures are not lifted anytime soon.
China's domestic steel demand will still fall if there is no new surge in COVID-19 due to a weak cash-strapped real estate sector.