Holiday, product shift to lower Feb output of hot-rolled coils

SHANGHAI, Feb 14 (SMM) – The Chinese New Year holiday impact, a shorter month and thin profits are likely to lower output of hot-rolled sheet coils in China in February by a sharp margin, which is likely to provide support to prices.

Chinese steelmakers plan to produce a total of 7.97 million mt of hot-rolled sheet coils this month, 6.3% less than a month earlier, an SMM survey showed.

About 7.48 million mt would likely be poured into the domestic market, down 6.5% month on month. The rest would enter the international market, with the monthly exports going down 3% from the previous month’s realised volume.

The CNY break of 2018 was also in February, but output of hot-rolled sheet coils for that month declined only 3% month on month. Steelmakers’ shift to rebar production to chase wider profits contributed to this year’s larger decline.

SMM calculations showed that profits on hot-rolled sheet coils fell below profits on rebar from September 2018.

Rebar, which is usually used in construction, is set to see a substantial pick-up in demand as construction sites resume or start after the CNY break. Demand for hot-rolled sheet coils, however, is likely to hold relatively steady. This prompted steelmakers to plan more production of rebar.

The spread in profits that rebar and hot-rolled sheet coils production could incur averaged 246 yuan/mt in 2018, SMM calculations showed.