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“We are becoming very worried about the state of inventories. This is developing into a serious situation because H-beam stockpiles are now at their highest since September 2011,” a company official told Steel First.
H-beam stockpiles held by the Tokiwakai network of dealers handling NSSMC products rose by 19,800 tonnes, or 10% month-on-month, at the end of February to 219,500 tonnes. Inventory ratio – which measures stockpiles against shipments – rose by 0.41 percentage points to 2.67 month's worth of supply.
This is well above the ideal level of two months' worth of supply.
The big jump in inventory is being attributed not only to seasonal factors but also stockpiling ahead of next month's tax hike by fabricators.
NSSMC's latest tone is in marked contrast to even last month when it insisted it was not overly concerned about the fact that stocks have been steadily climbing since October.
However, the latest figures have spurred the company into action, with it now saying that it will reduce H-beam orders beginning from April rolling by 50%.
“We will continue to keep control over orders for as long as it takes until the supply and demand balance has improved,” the official said, noting that excess supplies have blocked price rises for a second straight month.
The company last raised its H-beam prices by Y2,000 per tonne ($19) in January.
However, NSSMC remains positive about the overall outlook for the fiscal year starting April 1, she added.
“The supply and demand situation is not good at the moment and needs to be corrected over the next few months but we think the situation for the whole of 2014 is not so serious,” she said.
Demand will be buoyed by factors such as reconstruction spending and preparations for the 2020 Tokyo Olympics, the official added.
H-beam inventory held by Japan’s Nippon Steel and Sumitomo Metals' (NSSMC) dealers have soared to their highest levels in more than two years, preventing the company from raising its prices.