HRC inventories fell slower amid high production

SHANGHAI, Dec 20 (SMM) – Inventories of hot-rolled coil (HRC) in China continued to fall this week, but by a smaller margin, showed SMM data, growing chances of an end to the inventory downtrend in sight amid continued producing enthusiasm among steelmakers.

SMM data showed that stocks of HRC across social warehouses and steelmakers in China fell for a 10th straight week, decreasing 0.5% to 2.36 million mt in the week ended December 19, much smaller than a drop of 5.5% in the previous week. This was 14.3% lower than a year ago.

This week, social inventories of HRC dipped 0.2% to 1.56 million mt, as demand remained resilient. Notably, transport capacity constraints have left a large number of cargoes stranded at ports, after northern steelmakers delivered more cargoes to southern markets to chase higher profits. The arrival of those cargoes will also help lift stocks at social warehouses.

HRC stocks at steel mills fell 1% this week to 798,400 mt, as orders improved after mills lowered their quotes while spot prices remained high.  

On the backdrop of high producing enthusiasm among steelmakers, narrowing profit spreads between rebar and HRC may intensify supply pressure on HRC, bringing forward the timing of inventories reversing to trend higher and weighing on spot prices.

As of December 19, steel mills could see a profit of 574 yuan/mt on rebar, and 524 yuan/mt on HRC, showed SMM calculations.