[SMM Analysis] Inventory Turns From Decline to Increase; Hot-Rolled Coil Supply-Demand Imbalance Gradually Intensifies

According to SMM data, this week’s hot-rolled coil production was 3.1131 million mt, with output continuing to pull back due to maintenance and production cuts. On the inventory side, demand weakened in the off-season, while extreme weather such as typhoons and high temperatures also weighed on demand. As of July 16, China’s total hot-rolled coil inventory stood at 5.5346 million mt, up 30,000 mt WoW, an increase of 0.54%, officially marking the inflection point for inventory buildup.

Looking ahead, given relatively concentrated maintenance among some steel mills from mid to late July, hot-rolled coil production is likely to continue fluctuating at low levels from mid-to-late July to mid-August, showing a pattern of declining first and then increasing. On the inventory side, with sluggish demand release and resource circulation in the off-season, inventories are expected to build up over the next four weeks. From late July to mid-August, total hot-rolled coil inventory is expected to accumulate by around 300,000-400,000 mt, compared with a buildup of about 200,000-250,000 mt in the same period last year.

Overall, the supply-demand imbalance for hot-rolled coil will gradually intensify over the next four weeks, weakening price support. Attention should be paid to expectations for hot metal output to bottom out and rebound, and whether demand will weaken further. Hot-rolled coil prices are expected to consolidate within the 3,260-3,350 range by the end of July, with upside and downside space yet to open up.