[Hot Topic] Hot Rolled Coil Total Inventory Expected to Reach a Turning Point for Decline in Mid-March

According to SMM data, in the first week after the holiday, the national social inventory of hot-rolled coil in 86 warehouses (large sample) surveyed by SMM was 5.3775 million mt, up 1.1404 million mt WoW, up 26.92% WoW, and up 31.57% YoY on a lunar calendar basis. In the first week after the holiday, the national social inventory accumulated significantly. By region, the markets with larger accumulations were south China, east China, and north China.

The total SMM hot-rolled coil inventory was 6.7206 million mt, up 1.3068 million mt WoW, up 24% WoW, and up 24% YoY on a lunar calendar basis, meeting previous expectations of a 20%–25% inventory increase in the first week after the holiday.

Looking ahead, considering that downstream demand is expected to gradually and orderly pick up starting in March, coupled with rising macro expectations, domestic hot-rolled coil inventory is projected to enter a destocking cycle around mid-March (the third to fourth week after the holiday).

Regarding hot-rolled coil price trends, ferrous metals traded in the doldrums in the first week after the holiday, but the most-traded rebar and hot-rolled coil contracts faced strong resistance to further declines (rebar at 3,000 points, hot-rolled coil at 3,180 points). Next week, expectations surrounding the Two Sessions, steel mill production cuts, and gradually recovering demand are likely to become the main trading themes, potentially providing some stimulus to steel prices. Hot-rolled coil prices are expected to have a slight chance of strengthening, with attention on the resistance level of 3,315 for the most-traded hot-rolled coil contract. If the stimulus from the meetings falls short of expectations, prices may face a pullback risk.