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Steel City: Destocking Slowdown on Shanghai Steel
In May, the steel industry witnessed a peak in crude steel production, yet the pressure on inventory reduction in the real estate sector remained high. Amid an oversupplied market and deepening contradictions, the outlook for rebar remains uncertain.
The country’s daily crude steel output reached its highest level in mid-April, hitting 2,280,200 tons per day—a year-on-year increase of 7.8%. This surge was driven by a significant rise in blast furnace utilization rates, with Tangshan's capacity utilization jumping to 91.86%, the highest since late January. These figures reflect strong production momentum, with the average daily output already exceeding 2 million tons in April, which is typically a high season for steel output.
According to data from the China Steel Association, crude steel production in the first quarter totaled 183.32 million tons, up 1.8% year-on-year. In the first half of April, total crude steel output reached 44.317 million tons, a 4.53% increase compared to the same period last year. If April’s production had remained flat from the previous year, the daily output would have needed to be around 1.936 million tons—still below the normal 2 million ton threshold. Given the high blast furnace utilization rate in late April, it is likely that actual production exceeded the previous year’s levels.
May is traditionally the peak month for steel production, and this year is expected to see continued growth. However, the destocking process has started to slow down. Over the past eight weeks, wire rods and rebar accounted for 75% of the reduction in steel inventories, while hot rolled coils contributed 16%. This highlights the seasonal demand for construction materials, and the reductions in both wire rod and rebar stocks were greater than those seen during the same period last year, suggesting stronger demand this season.
Despite this, the rebar destocking rate has slowed in recent weeks, dropping from a historical high of 81,000 tons to 67,000 tons. According to National Bureau of Statistics data, the sales ratio of commercial housing stocks in March reached 5.4 months, while residential stock sales ratio hit 4.1 months—both reaching new highs since 2012. This indicates growing pressure on real estate inventory.
Looking at the four-week moving average of commercial housing transactions in 30 major cities, transaction volumes declined across all tiers in April, signaling weak destocking in the property market. Additionally, the sources of real estate development investment showed signs of slowing down. In the first quarter, real estate funding grew by 6.6% year-on-year, a decrease of 5.8 percentage points from the previous two months—the lowest since July 2012. Meanwhile, total real estate investment increased by 16.8% year-on-year, but this growth was down 2.5 percentage points from the previous two months, the lowest since December 2012.
Key components like self-raised funds, bank loans, and other sources such as deposits and personal mortgages all saw slower growth. Notably, “other fundsâ€â€”which make up 40% of the total—experienced their first negative growth since June 2012, declining by 1.9% year-on-year. This further confirms the sluggish performance of the real estate market.
With warnings from the central bank and banking regulators about real estate risks, banks and non-bank financial institutions may continue to tighten credit policies, further limiting the flow of funds into real estate development. As a result, real estate investment is likely to slow down even more in May.