HRC inventories rose 0.2% after 10-week draw

SHANGHAI, Dec 27 (SMM) – Inventories of hot-rolled coil (HRC) in China rose this week, after 10 consecutive weeks of declines, as stocks at steelmakers jumped after truck upgrading to models that meet the national V emission standards limited road transport capacity in China’s top steelmaking hub of Tangshan and nearby areas and some mills stockpiled for delivery.

SMM data showed that stocks of HRC across social warehouses and steelmakers in China increased 2% to 2.41 million mt in the week ended December 26. This was 14.7% lower than a year ago.

This week, HRC stocks at steelmakers rose 6.4% to 849,300 mt, while social inventories fell 0.2% to 1.56 million mt, marking a 11th straight week of declines.

Relatively stable demand and slow deliveries from ports to warehouses contributed to the continued decline in HRC social inventories, even as arrivals at major markets have increased for two weeks. Stranded cargoes at ports, however, indicate that social inventory pressure is stronger than it appears.

As of December 26, mills could see a profit of 550 yuan/mt on HRC, 130 yuan/mt higher than the profit on rebar, according to SMM calculations. Decent profits have driven some mills to shift their production from rebar to HRC, and will keep HRC production high, exerting downward pressure on prices.