SHANGHAI, Oct 10 (SMM) - SMM data showed that inventories of hot-rolled coils (HRC) and plates across social warehouses and steelmakers, which are used in automobiles and home appliances, increased 6.94% or 281,900 mt from September 24 in the week ended October 9 to 4.06 million mt. The stocks were 27.3% higher than the same period last year.
Demand weakened ahead of the National Day and Mid-Autumn Festival holidays while steel mills still maintained production, prompting total inventories to build up sharply.
SMM data showed that HRC stocks across social warehouses increased 7.04% or 201,700 mt from September 24 in the week ended October 9 to 3.07 million mt. The stocks were 24.9% higher than the same period last year.
HRC stocks across social warehouses accumulated sharply, extending increase on week and higher compared to the previous year. On the supply side, steel mills have been receiving orders at low prices before the holidays, and cargoes were shipped to the warehouses during the holiday and supply was robust. Most of the hot rolling trading companies were away for the holidays with muted trades, according to an SMM survey.
On the end-user side, the production department of the manufacturing industry has a relatively short vacation time, but has basically completed the pre-holiday restocking. HRC destocking rate has slowed down significantly, resulting in a large accumulation of stocks across social warehouses and steelmakers.
In-plant HRC inventories increased 6.69% or 80,300 mt from September 24 and rose 33.4% year on year to 1.28 million mt in the week ended October 9, showed SMM data.
HRC output remained high. Although most steel mills have taken orders and delivered goods actively before the long holidays, destocking of steel mills is lagging behind output, leading to accumulation of in-plant HRC inventories.
The sharp increase in in-plant HRC inventories after the long holidays is within market expectations, and the increase in inventory is much sharper compared with the same period last year. HRC weekly output during the National Day holidays is 200,000 mt higher than the same period of last year, and a surge in supply has increased pressure on market inventories. End-user purchasing was more cautious this year, and the demand for restocking before the holidays was sluggish. Traders lacked confidence in the post-holiday market and procured cautiously, which led to the weak destocking of social and in-plant inventories.
Trades are expected to recover in the near term, stimulated by the news of limited production in Tangshan, boosting market confidence to a certain extent and relieving the pressure of the accumulated stocks.
On the other hand, end-user demand for restocking after the holidays is diminishing with high inventory pressure. Stocks are unlikely to decline further and HRC prices will continue to fluctuate under pressure.
