SHANGHAI, Oct 29 (SMM)—Inventories of hot-rolled coils of steel sheets used to produce home appliances and cars in China continued to shrink at a fast pace this week, as demand was robust in a peak season. 

SMM data showed that HRC stocks across social warehouses and steelmakers declined 3.52%, or 140,100 mt in the week ended October 29 to 3.84 million mt, after a 3.96% loss in the previous week. The stocks were 28.12% higher than the same period last year.

Inventories across social warehouses fell 3.09%, or 88,700 mt, on the week to 2.78 million mt. This was 33.53% higher than the same period last year. Robust trades in the spot market driven by strong end-user demand accounted for the decline in HRC social inventories.

HRC stocks at steelmakers shrank 51,300 mt, or 4.65%, week on week, but rose 15.74% year on year, to 1.05 million mt this week. Output held largely unchanged on the week, while orders were robust across most steelmakers. The colder weather in northeast China exerted little impact on in-plant inventories.

HRC output affected by maintenance is estimated to stand at about 50,000 mt in November, down 27% from October, according to SMM preliminary statistics. Meanwhile, weaker demand in the north prompted steelmakers and traders to increase shipments to the south. These will post greater supply pressure in some regions in the second half of November.

Automakers stepped up production in the fourth quarter, and sales of heavy trucks and excavators soared year on year, significantly boosting demand for HRC.

HRC inventories are expected to extend declines in the short term as demand was strong in a peak season, which will underpin spot prices. But in the long run, supply increases brought by resumptions from maintenance and weaker demand in north and northeast China will lead to greater supply pressure for the southern market, curbing spot prices.