Steel inventory in major cities increased by 204,700 tons week-on-week to 6.98 million tons through September 18, with the inventory of threaded steel up 125,000 tons and that
of steel rods up 79,700 tons, reports China Securities Journal, citing Xiben New Line Stock.
This was the fourth straight week in which steel inventory increased, with the level of inventory higher than in the same period last year.
Through September 16, the average price of grade two 25mm threaded steel was 4,981 yuan per ton, down 39 yuan per ton week-on-week. The price of high rods dropped 24 yuan per ton week-on-week to 5,109 yuan per ton during the same period.
Senior analyst from Xiben, Qiu Yuecheng, said August economic data showed that economic growth in China was slowing, and investments in real estate and in the railway sector had dropped, leading to weak steel demand.
Although major steel makers announced hikes in the October ex-factory prices of their main products last week, more steelmakers are reducing production through conducting maintenance work in order to deal with the sluggish steel market.
The People's Bank of China had injected a net seven billion yuan into the market last week, the ninth straight week in which there was a net injection of liquidity by the central bank. The move did not help to improve the current tight liquidity conditions in the market.
The monthly discount rate of major bank acceptance bills rose from 8.28 percent on August 22 to 8.58 percent on September 9, hitting a record high since the financial crisis in 2008.
Jiangsu Shagang (002075) adjusted its interest discount on bank acceptance bills to 42 yuan per ton. Tight liquidity and higher financing costs will put further pressures on steel prices, according to the report.