China: Many construction steel end-users hold back from pre-holiday restocking

Though many Chinese steel users are showing some interest in building their inventories of construction steel before the country's Labour Day holiday over 1-5 May, a large number are planning to delay buying and reduce the tonnage they set aside, according to Mysteel's latest survey.

The five-day holiday will see many steel traders leave the market for the break and logistics services will be disrupted to some extent, so building contractors planning to continue operating for some or all of the holiday period will need to replenish their stocks of construction steel while they can, Mysteel Global noted.

Among the 28 infrastructure companies and 12 real estate companies across China that Mysteel sampled as of 25 April, some 26 or 65% of the respondents said they were taking the initiative to stock up construction steel, while 14 or 35% replied that for now, they have no such inclination to do so, the survey results showed.

On the one hand, most of the end-users said they were currently holding relatively low levels of construction steel stocks, prompting some to consider accumulating more ahead of the break.

For example, 38 or 95% of the users sampled replied that compared with last year, their inventories on hand now were at a low level, the findings showed.

A Shanghai-based market analyst suggested this could be explained by the fact that the building companies' appetite for construction steel was constrained during the January-March quarter, mainly due to funding shortages and generally slow progress of building projects.

But on the other hand, considering that the financial pressures aren't likely to improve significantly anytime soon, those end-users with replenishment plans are choosing to delay their purchasing and will probably reduce the tonnes they buy, the analyst pointed out.

Among the 26 end-users who planned to build construction steel stocks, 22 said that they would start procuring just five days before the holiday starts - meaning from Friday. Meanwhile, 21 construction steel users replied that they would be purchasing less tonnage compared with last year, according to Mysteel's tracking.

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and BigMint.