SMM HRC Weekly Balance & Social Inventory Review: Supply Weakness and Strong Demand Lead to Expanded Decline in Social Inventory

Ø  HRC Weekly Balance

Ø  This week's production declined WoW

This week, some steel mills in north-east and north China completed maintenance, and pig iron flow resumed in some mills in south China, leading to a slight WoW decline in HRC production.

Ø  This week's HRC social inventory decline widened

This week, SMM statistics showed that the national HRC social inventory in 86 warehouses (large sample) was 3.8347 million mt, down 195,800 mt WoW, a 4.86% WoW decline, and an 8.8% YoY decline. The national social inventory continued to decline this week. By region, the declines in south, east, and north China markets were larger than those in central and north-east China markets. In detail:

l  [Shanghai] This week, Shanghai inventory continued to deplete slowly

This week, Shanghai HRC inventory was 33.25 mt, down 0.17 mt WoW, a 0.51% decline; the YoY decline was 15.22%, and the lunar YoY decline was 6.44%.

l  [Lecong] Weak supply and strong demand led to a significant inventory depletion in Lecong this week

This week, Lecong HRC inventory was 77.64 mt, down 60,700 mt WoW, a 7.25% decline; the YoY decline was 211,400 mt, a 21.40% YoY decline.

l  [Zhangjiagang] This week, Zhangjiagang inventory decline accelerated

This week, Zhangjiagang HRC inventory was 410,000 mt, down 20,000 mt WoW, a 4.65% decline; the YoY increase was 5.13%, and the lunar YoY increase was 19.88%.

Some steel mills redirected pig iron, leading to a slight reduction in HRC supply; futures fluctuated rangebound, and market procurement demand improved compared to before. Weak supply and strong demand widened the social inventory decline. Looking ahead, steel mills remain highly motivated to produce, with few new maintenance plans, and supply pressure is expected to rebound. However, demand release remains resilient, and the national social inventory is expected to continue depleting in the short term.