SHANGHAI, Aug 2 (SMM) – Social inventories of hot-rolled coil (HRC) in China grew by a larger margin this week, as buyers exercised caution on the potential ease of production curbs in Tangshan and a lack of progress between the US and China over trade negotiations.
SMM data showed that HRC stocks across social warehouses rose for a 10th straight week, gaining 2.8% from a week ago to stand at 2.51 million mt as of Thursday August 1, after an increase of 1.5% in the previous week. The figure was 15.5% up from a year ago.
This offset the declines in in-plant stocks, and pushed overall stocks across social and in-plant warehouses in China up 1.4% week on week and 9% year on year to 3.47 million mt.
HRC stocks across steel mills shrank 2% this week, to 954,900 mt, as most producers in Tangshan suspended during July 26-28 for the earthquake anniversary and ecological environment meeting.
Some re-rollers and mills that adopt a blast-furnace route in Tangshan plan to recover production, after a draft smog-control plan for August that was drawn up by local environmental authorities and submitted to the city government over the weekend suggesting an easing in production restrictions on steelmaking.
This is unlikely to exert pressure on the spot market until the end of August, as it takes a longer time for northern cargoes to move to south China, where currently see a premium of 100-200 yuan/mt over HRC prices in eastern markets and demand is recovering from the rainy season.
Demand in August is also likely to be bolstered by a possible production rush across downstream consumers, as some of them have been ordered to suspend in September to prepare for the 70th anniversary of the founding of the country in October.
This grew the chance of an improvement in fundamentals in the first half of August, which, together with high costs, will remain supportive of spot prices.